In a major boost to West Africa’s private equity and venture capital ecosystem, Nigerian investment firm Aruwa Capital Management has successfully raised $35 million in the first close of its second fund. The firm initially targeted $40 million, but now aims for a final close of $50 million, with a hard cap set at $60 million—a reflection of the firm’s growing ambition and strong investor confidence.

The successful first close of Fund II showcases not just the resilience of the Aruwa team but also the growing investor appetite for African small and medium-sized enterprises (SMEs) that are positioned for scale.

A Diverse and Strategic Investor Base

Fund II brings together a strategic mix of returning investors and new backers, signaling widespread faith in Aruwa’s investment strategy and operational execution. Returning investors such as the Mastercard Foundation Africa Growth Fund (MFAGF) and the Visa Foundation have reaffirmed their commitment to Aruwa’s vision. New entrants include notable institutions such as Nigeria’s Bank of Industry (BOI), British International Investment (BII), and the Electrification Financing Initiative (ElectriFI).

Dorothy Nyambi, President and CEO of MEDA (the fund manager for MFAGF), emphasized the significance of Aruwa’s work, stating:
“Aruwa Capital’s momentum is a powerful reminder of the catalytic effect of what’s possible when we invest with intention and equity. At MEDA, we’re proud to be part of Fund I and now stand alongside Fund II as an anchor investor.”

This collaboration highlights an emerging trend across Africa: blended finance approaches that combine impact investment, gender-lens investing, and commercial viability.

A Strong Foundation: Success of Fund I

Aruwa Capital’s first fund, launched in 2019, has become a case study in smart, impactful investing. Over its investment period, Fund I made 11 investments across critical sectors such as healthcare, energy access, and consumer goods. The firm’s emphasis on tech-enabled companies led to strategic investments in FairMoney and OmniRetail, both of which have been recognized in the Financial Times’ list of Africa’s fastest-growing companies.

The results speak volumes:

• Companies backed by Aruwa’s first fund have achieved 22x growth in revenues in local currency terms.
  
• Collectively, these portfolio businesses have generated over 200,000 direct and indirect jobs.
  
• About 73% of Fund I’s investments were either founded or led by women—a testament to Aruwa’s gender-lens investment strategy.
  

These outcomes have strengthened Aruwa Capital’s positioning as a unique player in Africa’s alternative investment landscape, effectively blending impact and returns.

Keeping Strategy Steady in Fund II

According to Adesuwa Okunbo Rhodes, Founder and Managing Partner of Aruwa Capital Management, Fund II will maintain the same strategic investment focus, with a commitment to supporting high-growth SMEs in Nigeria and Ghana.

“We are very intentional about backing companies that are solving real problems across healthcare, education, financial inclusion, and clean energy,” Rhodes said in a recent statement. “Our investments must deliver both outsized returns and tangible social impact.”

Fund II is designed to provide growth capital in the range of $1 million to $3 million per business. These investments will continue to target companies with:

• Minimum annual revenues of $500,000,
  
• Clear paths to profitability,
  
• Strong leadership teams, with an intentional bias toward female founders or women-led businesses.
  

Importantly, Aruwa Capital’s approach blends the discipline of private equity with the risk appetite of venture capital. This ensures that portfolio companies are not just promising on paper but have real, sustainable business models.

Fundraising Challenges and Local Capital Mobilization

Fundraising for Fund II began in November 2023, amidst a difficult macroeconomic climate. Nevertheless, by July 2024, Aruwa Capital had already secured commitments worth $20 million, an impressive feat given the global slowdown in venture capital activity.

While many African funds continue to rely on foreign institutional investors, Aruwa Capital is actively working to mobilize local capital. The participation of Nigeria’s Bank of Industry (BOI) in Fund II is particularly significant.

Dr. Olasupo Olusi, Managing Director at BOI, stated:
“Aruwa has consistently demonstrated a strong track record in bridging SME funding gaps and catalyzing both local and international capital. We look forward to a productive partnership with their team and portfolio companies.”

Rhodes, however, notes that convincing local investors remains an uphill battle:
“A lot of local institutions are still very cautious. They’re more familiar with fixed-income investments like treasury bills and government bonds. To pivot them towards private equity and venture capital, you need an impeccable track record and strong storytelling,” she said.

This insight taps into a larger conversation about capital flight and financial inclusion on the continent. Unlocking local capital is increasingly seen as vital to sustainable development and economic resilience in Africa.

Rigorous Due Diligence: Lessons from Fund I

Learning from Fund I, Aruwa Capital is doubling down on its due diligence processes for Fund II. Rhodes emphasized that beyond evaluating financials and market opportunities, the firm will place greater focus on the character and values of founders.

“We’ve seen that no matter how great a business model is, bad leadership can ruin a company. For Fund II, we’ll spend even more time understanding the founders we back—their vision, integrity, and ability to build strong teams,” Rhodes explained.

Additionally, Aruwa will be more proactive in helping its portfolio companies develop:

• Strong organizational cultures,
  
• Effective governance structures, and
  
• Strategies for staff retention.
  

Such a hands-on approach is essential, especially in Africa’s nascent but rapidly evolving startup ecosystem, where founder mismanagement has caused several high-profile company failures.

Why Gender-Lens Investing Matters

As one of the few female-founded investment firms on the African continent, Aruwa Capital’s commitment to gender-lens investing is more than just a strategy—it’s a mission.

Rhodes is passionate about the untapped potential of women entrepreneurs:
“Women-led businesses are consistently underfunded despite their proven resilience and profitability. At Aruwa, we’re helping to close that gap by ensuring women get the capital and operational support they need to scale.”

Gender-lens investing has shown to deliver higher returns in many contexts, and it also creates positive social outcomes by:

• Empowering women economically,
  
• Reducing inequality,
  
• Driving broader community development.
  

It’s a bet that is already paying off for Aruwa—and one that could reshape Africa’s entrepreneurial landscape if scaled across the investment ecosystem.

The Broader Context: Africa’s SME Financing Gap

Aruwa Capital’s Fund II comes at a time when Africa’s SME sector is increasingly recognized as the engine of economic growth. SMEs account for about 90% of businesses and more than half of employment across the continent. Yet, according to estimates by the International Finance Corporation (IFC), Africa’s SME financing gap exceeds $330 billion annually.

Addressing this financing gap is crucial for achieving key development goals, from poverty reduction to sustainable industrialization. Investment firms like Aruwa are stepping into this space with innovative models that blend impact with profitability—demonstrating that doing good and doing well are not mutually exclusive.

Looking Ahead

With the first close of Fund II secured, Aruwa Capital is now laser-focused on deploying capital to businesses that can transform the African continent’s economic narrative. The fund is on track to unlock critical value chains in sectors such as:

• Renewable Energy,
  
• Healthcare Access,
  
• Affordable Consumer Goods,
  
• Financial Inclusion Technologies.
  

As Rhodes aptly puts it:
“Our vision is to back businesses that improve lives, empower communities, and generate wealth sustainably. Africa’s future depends on entrepreneurs who are solving real-world problems—and our job is to fuel their journeys.”

In a world where impact, gender equality, and economic returns are increasingly intertwined, Aruwa Capital Management stands out as a beacon of possibility—not just for Nigeria and Ghana, but for the entire African continent.

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Photo source: Google

By: Montel Kamau

Serrari Financial Analyst

29th April, 2025