With Norrsken22, a Pan-African venture capital firm, reaching the final closure of its maiden fund and raising a total of $205 million, exceeding its initial target, it’s an exciting time for growth-stage investing in Africa. This further demonstrates institutional investors’ strong interest in helping African businesses during a critical stage of development.
Five individuals with a wealth of venture capital and private equity experience founded Norrsken22: general partners Ngetha Waithaka and Lexi Novitske, managing partner Natalie Kolbe, and founding partners Niklas Adalberth and Hans Otterling. This nearly two-year-old venture capital firm maintains operating teams in Ghana, South Africa, Kenya, and Nigeria.
After completing the first close at $110 million, the partners launched the fund in January of last year under the name Norrsken22 African Tech Growth Fund. A group of thirty unicorn founders from around the world contributed about 59% of the capital. These founders included Olugbenga Agboola, CEO of Flutterwave, Niklas Zennström, co-founder of Skype, Jacob de Geer, co-founder of iZettle, and Niklas Östberg, co-founder of Delivery Hero.
Fundraising for Norrsken22 started during a period of notable capital inflow into the technology industry. The company sought to complete the final close by the end of 2022 in addition to having conversations with a number of family offices and development finance institutions (DFIs), which is a requirement for raising a sizable fund in Africa.
Since then, though, there has been a downturn in the global digital investment scene, which has affected all forms of fundraising, including that from institutional investors. The amount of venture capital invested in Africa in 2022 was between $5 and $6 billion. According to data from The Big Deal and Briter Bridges, it has decreased to a range of $2.5 billion to $3.4 billion thus far in 2023, which is in keeping with the general downturn in venture capital activity.
The present downturn in technology investments resulted in a one-year postponement of Norrsken22’s ultimate closure. Nevertheless, given the difficulties numerous VC firms—both domestic and international—continue to face in raising capital or concluding deals, this achievement is remarkable. The fact that the growth fund was oversubscribed makes this even more amazing.
Kolbe, the managing partner, credits the success to a resurgence of fundraising activity that began in early 2023. She added that the fund’s success was largely due to the backing of other limited partners, who were primarily the founders of unicorn firms, and the founding team of Norrsken22’s vast experience making investments in Africa.
Following the fund’s original close, which was aided by the SEB Pension Foundation and a few family offices, new limited partners for Norrsken22 included Standard Bank, British International Investment (BII), International Finance Corporation (IFC), U.S. International Development Finance Corporation (DFC), and Norfund.
Investing in Series A and B rounds
Large deals in Africa are usually led by international funds, with local investors focusing mostly on pre-seed to Series A rounds with smaller to medium-sized funds. Big Africa-focused funds such as Norrsken22 seek to close the gap between growth and late-stage capital. According to Kolbe, about half of Norrsken’s funding will go toward helping its portfolio grow through Series A and B companies. The remaining portion will be set aside for follow-on investments, mostly in the B and C rounds.
In a statement, the firm said it is focused on “entrepreneurs developing fintech, edtech, medtech [health tech], and market-enabling solutions that will deliver strong returns and have a positive impact across Africa.” So far, the Pan-African growth-stage fund has made five investments, including challenger bank TymeBank, B2B commerce retail platform Sabi, identity verification solution Smile Identity, auto financing platform Autochek and financing app for informal merchant communities Shara.
“The kind of value that we bring is for companies that are looking to grow beyond their borders and building up multi-country, Pan-African businesses. Having three general partners in the beacon economies of sub-Saharan Africa: Nigeria, Kenya and South Africa, we were able to provide the companies with people on the ground and networks on the ground, and we also understand the nuances of growth and opportunity in each of our markets,” Kolbe said on Norrsken22’s investment strategy. “Also, these are startups looking for an investor that can write a big check and can follow on in future rounds and anchor those rounds. That’s become very important, particularly now as liquidity becomes a bit tighter on the continent.”
The goal of Norrsken22 is still to invest in about 20 businesses. The average investment ticket size for the fund is roughly $10 million. However, as the partners said in a prior interview, it might reach as high as $16 million, covering follow-on rounds in specific portfolio businesses.
Similar to Norrsken22, a number of other growth-stage companies have raised one to two funds in recent years to address the lack of finance in Series A and beyond, including Partech Africa, TLcom finance, Algebra Ventures, Sawari Ventures, and Novastar Ventures. But some of them have also made investments at the pre-seed and seed phases, which is something Norrsken22 might look into if the proper chance presents itself. “We have put a small amount aside for the opportunistic earliest stage. If something comes to us and looks exciting, we may put small amounts of capital in, but that’s not where our focus is at all,” remarked Kolbe.
As it happens, a growth stage fund’s investment strategy places a lot of emphasis on getting portfolio firms ready for exits. As to the general partner’s statement, Norrsken22 conducts a comprehensive assessment of the possible exit scenarios. This involves identifying prospective buyers for the companies in its portfolio and evaluating the potential valuations that these buyers might provide after the investment period expires. She said that the firm has rejected investments when a strong exit strategy was not apparent and that this diligence is essential.
According to the managing partner, the company is considering consolidation involving regional industry leaders and exits for its portfolio companies through foreign strategic buyers. Startups may also be able to exit through large multinational firms in Africa. Since some of these organizations find it difficult to develop internally, they may look to acquire tech startups that they can either keep as independent entities under a new brand or integrate into their operations. An advisory group made up of corporate executives from international corporations in the banking, telecommunications, real estate, and agriculture sectors supports Norrsken22’s first fund.