VC fund hunts for $75m in start-up opportunities

Hunting for opportunities: Du Plessis says the new fund will be launched in July PIC: MBONGENI MGUNI
Hunting for opportunities: Du Plessis says the new fund will be launched in July PIC: MBONGENI MGUNI

Pan-African Venture Capital (VC) firm, Launch Africa, will seek to invest $75 million in tech start-ups across the continent, with a top executive revealing that the fund is eager to invest in Botswana.

Local start-ups have perennially cited funding as one of their major challenges, a barrier that suppresses the innovation of Batswana entrepreneurs, as well as citizens’ ability to design solutions for local challenges.

Launch Africa fund manager, Janade du Plessis told BusinessWeek the pan-African venture capital firm was finalising a $75 million fund due by July, which would target investing in 80 to 100 companies across the continent. Launch Africa recently closed a $36.3 million fund that invested in 133 companies, in 22 African countries.

In Botswana, Launch Africa’s sole investment is Alpha Direct, the direct-to-customer insurtech firm.

“We want to invest more in Botswana and it’s so easy for us to manage because it’s a 55-minute flight providing easy access,” du Plessis told BusinessWeek on the sidelines of this week’s Forbes Under 30 Summit. “Most venture capital invests in the Big Five but we see ourselves as a frontier fund and that’s why we were the first institutional money in Alpha Direct, first in the DRC and first in the Sudan, where we have two companies there. “So we go into these frontier markets.”

The Big Five refers to the leading destinations for tech investment in Africa which are Nigeria, Egypt, Kenya, South Africa, and Ghana. Launch Africa, through its frontier approach, searches for opportunities in other African countries, often seeking and securing the first-mover advantage.

“We look for three things. “Firstly, are there people building early-stage start-ups such as incubators and accelerators, and how the government is involved? “Secondly, do we have any corporate connections with banks, insurances, telcos, and thirdly are there later-stage investors like private equity or institutional investors? “If we can find those three things, we feel comfortable to go into a country,” he said.

The fund manager added: “We also know there’s a lot of FOMO (Fear of Missing Out). “When we did our investment in the DRC in a company called Maxi Cash, once the announcement was made, there were about six other venture capital firms on the next flight to see what was going on there.”

Under the upcoming fund, Launch Africa will have a maximum cheque of $1 million per investment, but this will be in stages. At the first stage, the fund may invest $500,000 depending on the maturity of the business and then continue to invest if required, up to a maximum of $1 million.

Du Plessis explained that Launch Africa was looking for reliable businesses, with some revenue that they could apply their growth models to.

“What we do very well is get companies that are producing $10,000 or $25,000 a month from their clients and we get you to a $100,000 monthly recurring revenue in the shortest period,” he said. “That’s what we do very well at Launch Africa and we have processes for that. “Typically that would be a three to five-year process on your own but we try to do that for you in 12 to 18 months. “How do we do it? We obviously give you the cash to get on board as an investor, then we have specific programmes that we put our founders through. “We introduce them to our corporate networks so that they can get corporate customers because we are a Business to Business fund. “We would want that you expand into a different market within 12 to 18 months and we take responsibility for that.”

With Alpha Direct, du Plessis said Launch Africa was leading the insurtech firm’s expansion to South Africa, with an eye further afield to Kenya.

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