Global VC Firm, Partech Secures Largest Africa-focused Fund at $263 Million

The largest Africa-focused fund to date, Partech Africa II has reached its first close at €245 million (about $263 million), according to the international venture capital firm.

According to managing partners Tidjane Deme and Cyril Collon, the company, which focuses on early- and growth-stage entrepreneurs throughout the continent, aimed to raise roughly €230 million ($250 million) for its second African fund and reach a first closure at €150 million. Partech Africa II, however, closed above the stated target for the entire fund at first close due to the intense demand from LPs. Additionally, according to Deme on the conference, the African fund would now aim to reach a final closing of no more than €280 million (about $300 million).

One of three funds, including a $750 million growth fund and a $100 million seed fund that are aimed at different countries and industries around the world, launched by the international venture capital business in the previous two years is Partech Africa II. The first fund, Partech Africa I, which was announced in 2018 and closed at $143 million, is likewise a counterpart to this one.

Between then and now, venture capital activity has multiplied by several times. African companies raised more than $5 billion this year, or $6.5 billion when debt financing is included, as opposed to the $1.16 billion reported in 2018. According to the partners, this demonstrates how far the tech sector has progressed and how Partech’s new fund reflects that expansion.

The market we chose to raise fund two in last year was extremely different. Everything has changed; over the past five years, the amount of deals in Africa, particularly Series A and B deals, has multiplied by 14,” said Deme from the firm’s Dakar office.

“Series B ticket sizes have increased from around $10 million to $25 million, and the average Series A ticket size has increased from $4 million to almost $9 million. The market has changed, therefore we started raising fund two. Since the market has approved of what we did with fund 1, our objective is to build on it.

In nine nations that operate in 27, Partech’s first African fund invested in 17 firms at the Series A and B stage. Deme claims that the purpose of that fund was to support certain firms that were pursuing highly fragmented, unorganized, and deep economic sectors in Africa, “with many inefficiencies where adding a tech platform with strong operations might construct something that provides a lot of value.”

Several startups, including TradeDepot, Wave, Yoco, Reliance, and Nomba, highlight this approach. They cross over the industries that account for the majority of employment and economic activity in Africa, including fintech, retail and FMCG, agency banking, and health tech.

These startups are profiting from expanding consumer and commercial demand as well as easier access to digital infrastructure. Over a million merchants and 20 million end consumers on the continent have benefited from Partech Africa’s portfolio, the company claims.

According to Partech, more than 10% of the money that poured into the continent between 2021 and 2022 was attracted to its startups. The venture capital firm impressively counts the unicorn Wave and the WorldRemit subsidiary Sendwave among its portfolio companies (a spinoff from Sendwave).

Before Partech stepped in to assist in fine-tuning their business and operational models with funding and other value-adds, the majority of these companies had already achieved product-market fit. It’s also important to note that most entrepreneurs were contacted by Partech Africa, or vice versa, years before the firms were prepared to accept any investment. By building these connections, the investor was able to lead rounds with payments ranging from $1 million to $7 million.

“We do invest in late-seed. So when we say $1 million, it’s also because we can go earlier. Also, we will keep working on ensuring that we can preempt talented teams very early on and not necessarily wait till they are fundraising,” Collon said from Partech’s Dubai office. “Connecting with the market and entrepreneurs as we have done with fund I is essential for fund II’s success.”

For the second fund, Partech Africa will continue to follow this course of action. The venture capital company still intends to support Series A and B businesses in a variety of industries, including fintech, health tech, logistics, mobility, and edtech, but it is tripling the upper end of its ticket size to $15 million.

Limited partners in its Fund II come from a variety of backgrounds, including HNIs, family offices, DFIs, corporates, and African fund of funds, as well as anchor investor KfW, the German Development Bank. The International Finance Corporation (IFC), which we previously reported was investing $26 million in June, South Suez, FMO, Bertelsmann, European Investment Bank (EIB), British International Investment (BII), Deutsche Investitions- und Entwicklungsgesellschaft mbH (DEG), and Proparco are some additional existing and new LPs.

In relation to Partech’s fundraising activities with LPs over the years, Collon observed that “investors that weren’t ready to commit with Fund I engaged in Fund II.” “That’s a strong signal to attract new development financial institutions and other investors, and to encourage existing ones to increase their investments.”

The company plans to invest in more than 20 businesses from Fund II. It is one of the largest growth-stage funds with an emphasis on Africa, along with TLcom Capital, Norrsken22, Algebra Ventures, and Novastar Ventures. The group, which has offices in Dakar, Nairobi, and Dubai, is growing and one of these new places is Lagos. Additionally, Partech’s strong global platform, which supports vital operations including business growth and portfolio assistance, founders community, ESG, finance, compliance, and legal, enhances its operations.