Venture capital activity in Africa has shown resilience over the past six months, with major firms backing African startups closing funds despite an ongoing funding winter.
In the latest development, African venture capital firm TLcom Capital, which has offices in Lagos and Nairobi and focuses on early-stage startups, has announced its second fund, TIDE Africa Fund II, totaling $154 million. Completed financing. The final transaction makes the company the largest seed and Series A investor in Africa.
The oversubscribed fund, originally targeted to close at $150 million, attracted participation from more than 20 limited partners. Notable investors include the European Investment Bank (EIB), the Visa Foundation, Bertelsmann, and his AfricaGrow, a joint venture between Allianz and his DEG Impact.
The news comes two years and months after TLcom Capital announced the first close of its second fund at $70 million, matching the size of its first fund, TIDE Africa Fund I. There were some positives for the VC firm as a result of the longer funding period, managing partner Maurizio Caio told TechCrunch in an interview.
Notably, TLcom Capital closed its second fund in a shorter period of time than its predecessor, even though it was twice the size. Caio believes this is due to improved understanding and acceptance among limited partners of venture capital in Africa as a legitimate asset class. Additionally, the company's portfolio of companies that embody its investment strategy played a vital role in gaining investor trust and support.
Unlike many VC firms that move from supporting pre-seed and seed stage startups to later stage investments with subsequent funds, TLcom Capital maintains a consistent strategy. The firm, which also has offices in London, continues to prioritize early-stage opportunities, particularly seed and Series A, while also considering opportunistic deals in growth and later stages. For example, this investor backed 10 out of 11 companies in their first fund's seed or Series A. However, at a later stage it put money into subsequent rounds across both funds (a Series C investment in Andela, a unicorn provider responsible for global job placement for software developers and a digital bank in Nigeria). He participated in FairMoney's Series B extension round. )
“We start early when entrepreneurs are raising a seed or Series A, stay with them along the way, and invest when we think the company is worth putting more capital into.” I prefer to continue to do so,” Caio said. “The reason for this is that we are building a portfolio that supports 20 to 25 companies that can individually return funds ‘if all goes well’.”
The managing partner further highlights that when evaluating early-stage opportunities, TLcom assesses the potential for portfolio companies to generate returns of 10-20x. The approach, he said, is to ensure that successful companies cover their losses and enable companies to achieve a three to four times return on a total basis.
One way the company improves its risk in this regard is by supporting repeat founders. Examples include Sim Shagai (uLesson and Konga), Etop Ikpe (Autochek and Cars45), and Grant Brooke (Shara and Twiga). Despite past ventures not achieving desired results, Caio says these founders gained insights that helped them avoid repeating past mistakes and make better decisions in new ventures. “When things don't go as planned, it's important to act quickly, pivot and move on to the next venture, knowing that the lessons learned will pave the way for future success,” he said. Stated.
The other is to invest early in pre-seed stage deals. In 2020, TLcom Capital invested in Autochek and Okra at the pre-seed stage and followed up with subsequent rounds. Two years later, the company launched a pre-seed strategy that allocated $5 million to payments in check sizes and a low-touch approach. This created a pipeline for key strategies at Seed and Series A (skilling platform Talstack was the company's first recipient). Part of the fund, $2 million, was also earmarked for co-investing in women-led startups through FirstCheck Africa, a women-focused pre-seed fund. The firm says its commitment to gender balance is evident in its partnership and investment committee, which is majority female, and three out of five partners are women.
TLcom Capital, which focuses on traditional sectors such as fintech, mobility, agriculture, healthcare, education and commerce, has already backed six companies from the new fund, with amounts ranging from $1 million to $3 million. has made an initial investment. These include SeamlessHR, FairMoney, Zone, and Vendease. Additionally, the company expanded its portfolio to include ILLA, a middle-mile logistics platform, and Littlefish, which enables payments and banking products for small and medium-sized businesses, with its first investments in Egypt and South Africa, respectively.
“For us, it was important to add Egypt and South Africa as destinations for our capital, as the Big Four continues to produce the most valuable companies,” said Caio, adding that TLcom's portfolio to date pointed out that it was a start-up primarily based in Nigeria, but Kenya is a country where the company has since expanded its operational capabilities and expertise.
With a multi-sector focus, the company and other prominent venture capital firms such as Norsken22, Al Mada, Algebra Ventures, and Partec Africa have raised significant funding to support African startups from pre-seed to Series C. did. However, as these funds are deployed across different stages, attention will be focused on the exit opportunities that startups facilitate and the tangible benefits they bring to LPs as they grow. Because these achievements will play a key role in fostering growth across Africa's technology ecosystem.
“In Africa, it's not just about how much money comes in, it's about the profits,” Caio emphasizes. “We need global capital to look at Africa and think about where good investments can be made and where technology can create a lot of value. We are still a long way from achieving that at scale. So that's our main goal.”