One year after its first close, Partech has completed the raising of its second Africa-specific fund, named Partech Africa II, at €280 million (over $300 million). This surpasses its initial target of €230 million, making Partech Africa the largest fund dedicated to African startups.
Partech Africa’s successful fund closure comes against the backdrop of a significant decline in investment activity in Africa by global VCs and institutional investors. According to a Partech report, the continent experienced a 50% drop in investor activity in 2023 compared to the previous year. Influenced by global economic changes and local challenges, venture capital inflows for African startups reduced to a range of $2.9 billion to $4.1 billion last year, as opposed to the $4.6 billion to $6.5 billion range in 2022.
The slump in investment seen in Africa affected all stages of investment, with seed stage deals dropping by 33% and growth stage deals by 39%, as per Partech’s report. Although Partech Africa, known for leading investment rounds, can’t single-handedly overturn this downturn, its focus on seeding through Series C rounds could offer much-needed stability and support for startups during these tough times.
Partech Africa’s goal is to aid founders at various stages of their journey, from early to later rounds. “The capacity to anchor rounds at all stages from seed to early growth is more critical than ever,” Cyril Collon, a General Partner at Partech, stated.
Tidjane Deme, in an email to TechCrunch, mentioned that Partech Africa’s growing team would boost its ability to deploy capital effectively and provide support to portfolio companies across these stages. With offices in Dakar, Nairobi, and Dubai, Partech Africa recently expanded into Lagos, recruiting actively to closely engage with startups in the region. Given that a third of the firm’s portfolio companies are located there, this highlights Lagos’s importance. However, Deme clarified that the majority of the second fund will be deployed between Series A and B rounds.
Among the companies to benefit from Partech Africa’s second fund is Revio, a South African payment orchestration platform. Partech Africa co-led the seed round with global fintech fund QED. The firm also invested undisclosed amounts in an Egyptian proptech startup and a Senegalese e-commerce startup. With initial investments ranging from $1 million to $15 million, Partech Africa plans to back over 20 companies, it was revealed.
The Dakar-based venture capital firm, which supported 17 startups in its first fund, focuses on vital sectors such as fintech, agritech, health tech, FMCG, retail, and agency banking, that are essential for Africa’s job market and economy. Its prominent investments include companies like Wave, TradeDepot, Yoco, and Reliance.
Commenting on the firm’s deployment strategy, Deme noted, “Companies from the first fund can benefit from follow-on capital from the first fund but not from the second one. We keep supporting Fund 1 companies through their journey with capital and in many other ways.” The firm’s funding strategy was further discussed during its initial close last February.
Partech Africa’s investor base showcases a diverse variety of profiles. Its first close attracted support from development finance institutions, commercial investors, African fund-of-funds, and family offices among its limited partners. For the second close, it drew interest from US and Middle Eastern pension funds, sovereign funds, the Dubai Future District Fund (DFDF), and the African Reinsurance Corporation (Africa Re).
“We are grateful for the support and commitment of our investors: almost all Fund I investors reinvested, and some more than doubled their commitment,” Collon commented. “We are also honored to get the support from a new set of strategic investors from the US, the Middle East, and Africa, and for some of whom, this marks their first commitment in African tech.”
Despite challenges in raising capital as limited partners scrutinize strategy and track record, Partech’s African fund is among several substantial funds that have appeared on the continent in the past year. Other large-sized funds include Norrsken22, Al Mada, and Novastar’s Africa People + Planet. Furthermore, firms like Enza Capital, Equator, Knife Capital, and E3 Low Carbon Economy Fund for Africa (E3LCEF) have also closed considerable funds, signifying ongoing investor interest in Africa’s growth potential.
