Breega, a venture capital firm renowned for its early-stage funds in Europe, has turned its focus to Africa with the launch of a $75 million fund dedicated to supporting African startups. Having secured $52 million in commitments so far, the firm expects the final close by the end of 2024. This marks a significant expansion for Breega, which has established offices in Lagos, Nigeria, and Cape Town, South Africa, to strengthen its presence on the continent.

Strategic Investments Across Africa

Breega’s new fund will target Africa’s major startup ecosystems, including Nigeria, Egypt, South Africa, and Kenya, while also eyeing opportunities in Francophone countries such as Morocco, Senegal, Ivory Coast, Cameroon, and the Democratic Republic of Congo (DRC). The fund is designed to provide seed-stage investments ranging from $100,000 to $2 million, reserving 30-40% of its capital for follow-on rounds to help startups scale further.

The fund has attracted a diverse group of supporters, including high-net-worth individuals, tech entrepreneurs, and institutions like the French public investment bank Bpifrance and the Dutch development bank FMO.

Addressing Africa’s Core Needs

Breega’s co-founder, Ben Marrel, emphasizes that the fund is tailored to tackle Africa’s pressing needs, such as food security, housing, education, and healthcare. With Africa’s population projected to grow from 1.5 billion to 2.5 billion by 2050, the demand for innovative solutions is immense. “There is no way this growth can be managed without technology,” Marrel asserts.

The fund will focus on sectors that can address these challenges, including agritech, edtech, healthtech, and climate-focused solutions. Other priority areas include fintech, logistics and mobility, and energy infrastructure.

Challenges and Opportunities

While Marrel acknowledges that building a startup in Africa often involves creating markets from the ground up, he sees this as an opportunity for significant impact. For instance, fintechs face the hurdle of competing with the widespread use of cash payments. However, this challenge allows innovative startups to establish themselves as market leaders by offering transformative solutions.

“It’s harder at the start, but the impact you can make is so much greater,” Marrel explains. “Once you’re at that stage, the opportunities are endless.”

Africa’s Growing Innovation Ecosystem

Africa’s tech ecosystem has seen impressive growth over the past decade. In 2022, startups across the continent raised $3.3 billion, a sharp increase from $195 million in 2017, according to a report by Disrupt Africa. However, global economic pressures in 2023 saw funding drop to $2.4 billion, marking the first decline in annual growth since 2017.

Despite this dip, Marrel believes the ecosystem has reached a minimum funding threshold, albeit still constrained. Local venture capital firms typically manage funds of $10-20 million, and international investment remains limited.

Breega’s fund stands out as one of the few dedicated European venture capital efforts in Africa. French VC Partech, for instance, has operated a $300 million Africa-focused growth fund since 2017, while Stockholm-based Norrsken launched a $205 million fund targeting the continent in 2023.

Breega’s local presence sets it apart. “It’s uncommon to find a focused strategy with a dedicated fund and local presence,” says Marrel, adding that this reduces competition for high-quality deals.

Strengthening Local Operations

To bolster its operations, Breega has two partners already based in Africa: Melvyn Lubega in Cape Town and Tosin Faniro-Dada in Lagos. They will oversee the firm’s activities and help manage the pipeline of investments. Breega also plans to expand its Africa-based team to six members, ensuring stronger local engagement and expertise.

Breega’s Track Record in Africa

Breega has already made inroads into the African market, investing in nine startups over the past two years. These include:

• Sava: A Kenyan fintech focused on digital banking solutions.
• Kwara: Another Kenyan fintech transforming credit unions into modern digital banks.
• Numida: A Ugandan startup offering digital micro-loans to small businesses.

These investments highlight Breega’s commitment to sectors driving economic inclusion and development across Africa.

The Path Ahead

Africa’s burgeoning startup scene holds immense promise, with investors increasingly drawn to its untapped potential. Breega’s fund aligns with this narrative, focusing on areas that can yield both social impact and financial returns.

As Breega prepares to close its fund and deepen its engagement in Africa, the firm aims to play a pivotal role in shaping the continent’s innovation landscape. For startups, the availability of dedicated capital, combined with Breega’s expertise, offers a pathway to scale transformative solutions for Africa’s most pressing challenges.

Marrel’s vision encapsulates this ambition: “Africa represents boundless opportunities. By addressing fundamental needs with innovative technology, we can contribute to sustainable development while unlocking unparalleled growth prospects for startups.”

Conclusion

With its $75 million fund, Breega is set to become a key player in Africa’s venture capital landscape. By focusing on sectors critical to the continent’s development and leveraging its local presence, the firm is well-positioned to empower startups to drive innovation and create lasting impact.

As Breega’s fund gains momentum, its investments are likely to serve as a catalyst for Africa’s tech ecosystem, fostering solutions that address the continent’s challenges while seizing its vast opportunities.

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Photo source: Google

By: Montel Kamau

Serrari Financial Analyst

26th November, 2024