Nigerian venture capital firm Ventures Platform has raised $83 million for its second fund, giving the Pan-African investor significantly more capital to back early-stage startups across the continent.
The fund was oversubscribed, according to the firm, and is more than 80% larger than its first fund, which closed at $46 million in 2022.
Ventures Platform, founded by Kola Aina, plans to invest in startups operating in sectors including fintech, healthcare, software-as-a-service and other technology-enabled businesses addressing essential needs in African markets.
The new fund also marks a broader geographic strategy for the firm. While Ventures Platform’s first fund was largely focused on Nigeria, Fund II is targeting opportunities across the continent.
The firm has already invested in five companies in Kenya, South Africa and Egypt through the new fund.
AI moves higher on Ventures Platform’s investment agenda
Artificial intelligence is also becoming a more important part of the firm’s investment strategy, particularly where the technology can fundamentally change the cost of delivering services in African markets.
Aina said Ventures Platform is less interested in startups simply adding AI as a product feature and more interested in companies where AI can create a different business model, lower operating costs or enable businesses to serve markets that were previously difficult to reach.
This approach reflects a broader shift among African investors as startups and venture funds adapt to a market that has become less tolerant of high cash consumption and repeated fundraising without a clear path to sustainable value creation.
Ventures Platform expects to write cheques of up to $3 million from Fund II and plans to deploy the capital over the next three to four years.
African startups face a tougher funding environment
The new fund comes as African startup funding remains below the levels recorded during the continent’s venture capital boom.
African startups have raised about $930 million across more than 200 deals so far this year, compared with $1.16 billion raised across 447 deals during the previous year.
The decline in deal activity has coincided with a wider reset in global venture capital, with limited partners becoming more demanding about fund performance, portfolio construction, liquidity and investment discipline.
For Ventures Platform, the fundraising process lasted about 18 months.
The firm said investors are now looking beyond the size of a fund or the attractiveness of Africa’s growth story and are placing greater emphasis on whether fund managers can generate actual returns.
From “Why Africa?” to “Why you?”
The change in investor sentiment represents a significant shift from the period when African technology attracted large amounts of global venture capital largely on the strength of the continent’s demographic and digital-growth potential.
Today, fund managers have to demonstrate why they have a competitive advantage in sourcing companies, supporting founders and ultimately generating returns for investors.
For Ventures Platform, the answer is its combination of local market knowledge and international networks.
Aina said the firm believes that understanding the institutional, regulatory and market conditions facing African founders is increasingly important as companies expand across borders.
The firm is particularly interested in businesses capable of improving access to essential products and services, addressing infrastructure gaps or creating new categories of consumption.
70% of existing investors returned
The successful fundraising also received support from investors in Ventures Platform’s first fund.
About 70% of Fund I’s limited partners returned for the second fund, signalling continued confidence from a significant portion of its existing investor base.
Fund II’s backers include the European Bank for Reconstruction and Development, Norway’s development finance institution Norfund and the Ashesi University Foundation in Ghana.
Ventures Platform’s larger fund comes at a time when Africa’s venture capital industry is becoming more concentrated. Investors are increasingly favouring established managers with demonstrable track records while also selectively backing emerging funds with strong differentiation.
For African startups, the shift means access to venture capital is likely to remain available, but the conditions for securing it are becoming tougher.
The emphasis is moving towards businesses with stronger fundamentals, efficient use of capital, sound governance and the ability to survive periods when external funding becomes scarce.
Ventures Platform’s second fund therefore represents more than an increase in its investment capacity. It is also a bet that African technology companies capable of building durable businesses will continue to attract institutional capital even as the continent’s venture market becomes more disciplined.
