Fund II in Review - February 2023

February 25, 2023

Dear Co-Investor,

In April 2020, as the coronavirus spread like wildfire worldwide, we wrote what now appears to be a prophetic declaration - It is time to fund an African future. We called on you, our community of co-investors, to rise to the occasion by helping us back “mission-driven founders turning Africa’s biggest challenges into global businesses by solving hard problems in large markets”. As we wrote that spring, “ You too can fund an African future.”

And you did! 

Indeed, we could never have imagined your incredible response to this clarion call. 

Thanks to you, over the last two years, we have deployed $9.7m into 131 investments across 85 companies ending the year with a total portfolio count of 101 companies spread out across Africa and spanning diverse industries from prop-tech to ed-tech. 44% of our portfolio companies were accepted into global accelerator programs like Y-combinator, Techstars, and Google Black Founders Fund. Our portfolio has collectively gone on to raise over $300m in follow-on funding from top global investors like Sequoia, IDG, Greycroft, Tiger Global, and Softbank. From our humble beginnings, a fund many derided as not ”real” has become one of the continent’s most active and influential funds. More importantly, we have learned so many invaluable lessons which are guiding our strategy going forward. 

Here is some of what we learned.

In Fund II, we evolved from a Nigeria-focused fund into a true Pan-African Fund with investments in 10 countries across West, East, Southern, and North Africa. To accomplish this, our team undertook several tours of many African countries where we met with founders on the ground in different ecosystems. We also expanded our team presence from Nigeria to East and Southern Africa so we could learn about the intricacies and success factors of investing in various ecosystems. Thanks to your incredible deal flow, we got to evaluate many great investment opportunities from across Africa and different industries.

One of our biggest lessons was; without a clear conviction in an investment thesis, evaluating investment deals can be tiring and cumbersome. Given that there are more good opportunities than

your time and money can be deployed into,  you will always feel like you are missing out on something. Going forward we are building clear conviction around investing in startups that, we believe, can enable millions of African youth to participate in the global economy via the internet.


By 2035, Africa will become the world’s youngest and fastest-growing workforce, with a median age of 18 years old. Yet today, Africa only contributes 3% of the global GDP. However, as our world becomes more interconnected, it is now possible to access a myriad of opportunities from anywhere in the world via the internet. According to the World Bank, economic opportunities in the digital economy contribute to more than 15% of global GDP and, in the past decade, have been growing two and a half times faster than the physical world GDP. We’ve also seen that this is our zone of genius and passion, given prior successes like Andela, Flutterwave and Moove, amongst others, are laying the foundations of Africa’s digital economy. For us, investing in businesses enabling millions of African youth to participate in the fast-growing digital economy will give us our best shot at creating outsized returns and impact in our zone of genius and passion.

The second key learning for us was understanding that it takes a lot of dedicated effort to create a fund-returning investment (investments that return over 50x). Last year, when we deeply analyzed all our investments and returns across Fund I and Fund II, we saw a common theme with all our winners. In our winners, we were often the first investor and were deeply involved in the business alongside the founders for the first 300-500 days. In that time, we would help the company define a strong mission, vision and north star,  help hire a strong team, help bring on the first major client, help define the MVP and most importantly, help raise their first institutional seed round or debt financing. Unsurprisingly, given our teams’ operational expertise, it turns out that the more time we spend with a business, the better it seems to perform. Unfortunately, it is impossible for us to do this for as many businesses as we would like to because of the capacity we have as a small Fund. Going forward we plan to invest in fewer companies and take meaningful stakes (10-20% target pre-Series A). Thus allowing us to provide hands-on support across five areas we believe are critical to startups' success; storytelling, team building, business development, product development, and fundraising. With our operational experience in building some of Africa’s most successful startups at the foundational stages, our investment experience investing in 101 portfolio companies across  Fund I and Fund II, and this community of co-investors with varied skill sets and networks. We are uniquely positioned to create outsized value and impact for our portfolio companies in a way that is particular to us. Given how hands-on we tend to be, some people may confuse us for a Venture Studio. However, while venture studios build startups out of their studios, for Future Africa the founder is always the star, and we see ourselves as the early supporting cast. Our job is accelerating their path toward success in a reality where startup outcomes are often binary. We believe that is what true early-stage investing is all about, as inspired by the early fathers of venture capital.

We spearheaded the Community-based investment approach in Africa, bringing a Community of over 300 angel investors together, who made a total of 670 investments into 28 SPVs and 336 investments into our 10 Rolling Funds. More importantly, though, they brought valuable insights, networks, referrals, and talent to the table. We loved our Community-based approach but also realized the limitations of managing such a large investor base with a small team. Going forward, we will follow a more conventional Fund structure with an upfront raise, a 10-year Fund life, and a 3-4 year investment period. This structure will make it easier for Institutional and high-net-worth individual (HNWI) investors to invest in our Fund alongside our Community, which remains an important source of funding. At the same time, we invite members into our Community who are passionate about creating African Prosperity and are ready to lend critical skills and networks to our building efforts. 

We are excited about what the next 10 years will bring for the African tech ecosystem. In many ways, today’s African venture landscape closely resembles the US venture landscape in the 1970s. We believe our ecosystem today is too fragile for us to be simply capital allocators. We need to roll up our sleeves and build alongside exceptional entrepreneurs. 

Yours in Service,

Who did Fund II invest in? 

Investment Stage 

We funded 85 companies in Fund II, investing $9.7m, with approximately half going into initial checks and the other half to follow-on funding. Our average check size was $54k for initial investments and $110k for follow-ons. Our portfolio further raised a total of $347m in follow-on funding from other investors. Half of our investments were made at the pre-seed stage, with an average valuation of $4.7m, and the other half at the seed stage, with an average valuation of $10.5m. Naturally, given our small ticket sizes, we hold less than a 5% stake in most of our portfolio companies.  

Fund II Investment Overview:

Key learnings:

Future Africa has remained committed to funding companies solving Africa’s biggest challenges, and this North Star will continue to guide us into Fund III. In 2022, when others took a break from investing, our Collective stood strong, and we continued making critical investments across Africa. In the future, we aim to invest even earlier at the foundational stages of startups as founding investors. We will also invest larger initial ticket sizes of $100-500k and follow-on in subsequent rounds – giving us a meaningful stake in the businesses we invest in and help build.

Investment Sectors

Over the course of Fund II, we invested in a sector-agnostic way, focusing on the biggest themes and opportunities we saw. Our largest share of investments was made in the fintech space, which is testimony to the stage of our markets at that time that required the building of foundational infrastructure. The biggest group of fintech portfolio companies is focused on developing suitable lending products for the continent across B2C and B2B applications. Most of these companies collaborate closely with existing banking institutions, in

many instances, building critical infrastructure to help banks serve their current and potential customers better. Other fintech themes include wealth tech, insurance, remittance, and blockchain applications. 53% of our investments were into non-Fintech companies with a relatively even split between Talent (8 portcos), Retail & Consumer (7), Logistics (6), Real Estate (6) and Climate (5). Despite the early stage of the portfolio, we see emerging winners in each category, which is a testament to Africa’s vast investment potential. 

Key learnings:

Through our broad industry exposure, we learned invaluable lessons on key themes and success factors in each of these industries. Our broad investment themes also offered our investors a well-diversified portfolio. However, at the same time, the broad portfolio did not always allow us to go as deep into content expertise as we would have desired, which put limitations on the business model-specific support we could provide to our portfolio. 

Going forward, we aim to invest in a more thesis-driven approach, building category-defining companies that set the foundation to cement Africa's position and participation in the global digital economy. Our investment thesis is defined through the prism of Talent, Infrastructure, Markets, and the Environment - in short, T.I.M.E. We will fund and help build companies that 1) Talent - Build new talent pipelines with African youth for the digital economy, 2) Infrastructure - Deploy digital and physical infrastructure that will power innovation via the digital economy, 3) Markets - Innovate new approaches to aggregating demand and supply to create new markets, 4) Environment - Innovate and scale sustainable, and carbon neutral processes for making and moving products, food, and energy. 

Investment Geographies

When we started in 2019, Future Africa was fundamentally a Nigeria-focused Fund but with strong expertise in expanding Nigerian startups across the continent. In 2019 and 2020, 85% of our investments were made into Nigerian startups. Over 2021 and 2022, Future Africa transformed from a Nigerian to a Pan-African Fund, with close to half of our investments outside Nigeria. We also built a Pan-African team with a presence in Nairobi, Kampala, Johannesburg and Cape Town, in addition to Lagos and Abuja. 

Key learnings:

We learned the intricacies of the various ecosystems and the success factors for startups that are headquartered in countries with smaller inherent economies. We believe the regional collaboration of our ecosystems and the startups is vital for our overall African startup ecosystem to thrive. We are building fundamentally Pan-African and ultimately global companies, and thus being a Pan-African Fund and acting across the African regional ecosystems is key both for success and supporting our portfolio best. 

How did we support our Fund II portfolio? 

Through our own startup operating experience, we had an expectation of elements of support that would be most valuable to startups in their early journeys, which was further validated by our experience supporting portfolio companies. These areas are storytelling, team, product development, business development, and fundraising. 
  • Storytelling: We helped founders craft their stories on their mission and vision clearly, to attract the right team and partners. For example, through our FAVE-YC  program, we assisted founders in clarifying their goals and developing a data-backed, coherent mission and path toward profitability. We also provided hands-on assistance by helping portfolio companies submit outstanding applications to Y-Combinator. As a result of our efforts, Y-Combinator named Future Africa one of the top 50 recommenders globally. In total, 40% of our portfolio (41 portfolio companies) have participated in global accelerators. 
  • Team: We supported portfolio companies in hiring early engineering talent and senior team members needed to drive business objectives. We also partnered with Talent Africa, a Nigeria-based recruitment company, to provide portfolio companies with hiring fee discounts and access to a pool of senior talent. We launched the community platform on Slack for portfolio founders to connect seamlessly, build relationships, and share learning experiences and opportunities with each other. 
  • Product development:  Our product development support has been hands-on, as our in-house tech team (consisting of software engineers, product managers, and designers) actively assisted some portfolio companies in developing a highly effective product that meets customers' needs. 
  • Business Development: We assisted our portfolio companies in evaluating their distribution channels and connecting them with crucial business partners and potential clients that could aid in scaling their businesses. For example, we facilitated a collaboration between Releaf (a portfolio company) and Volcani International Partnerships to improve African agriculture through Israeli technology, starting with the cassava value chain through technical R&D linkages.
  • Fundraising: We utilised our network of 300+ co-investors globally to facilitate introductions and investments into our portfolio companies, which raised $347m in follow-ons. Moreover, in the wake of the slowing down of venture capital markets globally in 2022, Future Africa partnered with TLG Capital to set up a $25m debt fund for portfolio companies. Finally, we have partnered with Prosper Africa, a new Investment Facility to mobilize over $200 million in private capital to fuel African innovation and entrepreneurship. 

Key learnings:

Our biggest wins in the portfolio all share a common theme – we invested very early, often at the foundation stages, and were involved hands-on in the early phases of building the companies. However, we also realized that while the support we provided to our portfolio companies was highly appreciated, despite our best efforts, it is not possible to be deeply involved with a large portfolio of 80+ companies within the means we had available. Often leaving us, entrepreneurs at heart, deeply dissatisfied and frustrated. Thus in the future, we will invest in fewer companies into which we will focus our support and build efforts. At the same time, we will remain committed to supporting our existing Fund I and II portfolios through programmatic and individual  support. Separately we believe we can pull together resources across the ecosystem to support our startups in programmatic ways realizing common needs across the African startup ecosystem - stay tuned for this effort!

Who funded Fund II?

Our start of Fund II coincided with the start of the Covid pandemic, which made it difficult to raise institutional capital as the world came to a halt. Hence, we turned to our Community for funding which we named the ‘Collective’. What started as a far-fetched idea became a successful funding model adopted by many others on the continent, and our Collective stepped up in ways beyond our imagination. They not only brought capital to the table but became a source of invaluable investment referrals and support.

About half of our capital raised was raised through our 10 quarterly Rolling Funds and the other half through deal-by-deal Special Purpose Vehicles (SPVs). Our Collective made a total of 670 investments into 28 SPVs and 336 investments into our 10 Rolling Funds. In total, over 300 individual investors contributed financial capital across our Fund II vehicles. While most of our investors were individuals, we also onboarded the first institutional investors into Fund II.

Key learnings:

We loved our Community-based approach but also learned a lot about its limitations. The Collective was a huge source of inspiration, talent, and support for us. A quarter of our current team is former Collective members, including Mia von Koschitzky-Kimani, our Managing Partner. We received a large number of great investment leads from the Collective, and many Collective members showed up when it mattered to support our portfolio. However, investor management of 300+ individuals is a challenging endeavor; every investor deserves attention, responsiveness to their questions, and timely reporting, but the reality is that this kind of dedicated support requires a large team, which is not supported by the economics of a small fund. The Collective’s needs led us to hire a team that was larger than what we ultimately could justify and took away a lot of resources from our actual mission, which is supporting our portfolio. 

Thus, going forward we are steering away from deal-by-deal investments and the Rolling Fund Structure and adopting a more conventional Fund structure – with a 10-year life span and a 3-4 year investment period. This structure will make it easier for Institutional and high-net-worth individual (HNWI) investors to invest in our Fund alongside our Community, which remains an important source of funding. Similarly, we welcome members into our

Community who are passionate about creating African Prosperity and are ready to lend critical skills and networks to our building efforts.

How is Fund II performing? 

We have formally completed the Fund II investment period with the Q4 2022 Rolling Fund; however, in many ways, it is still early for our portfolio, which has an average investment holding period of 16 months. Nevertheless, initial traction is strong, with a 123% IRR and 2.49 MOIC through 15 priced-up rounds. Additionally, we have seen 64 SAFE rounds with higher valuation caps, which is not included in our IRR calculations but is an initial indicator that these companies are trending in the right direction. We have registered three write-offs to date. 

Given the effects of the declining global macroeconomic conditions on the startup fundraising environment in 2022, many portfolio companies are currently focused on shortening their path to profitability and sharpening their business models based on their most important value propositions. Despite this, there is undoubtedly heightened pressure on our founders. Some will fail in this process, while many will sustain and build remarkably resilient, category-defining companies. We are excited to continue supporting them throughout this journey.

As highlighted above, our biggest winners are companies that we invested in early (often at co-founding stages) and provided hands-on support to in the first 12-24 months of their journeys while leveraging our unique skill set of investing experience (through Fund I and Fund II) and operating experience (building and scaling startups on the continent). Similar to our startups that had to redefine themselves and evolve over the last 12 months, Future Africa has

embarked on a similar journey. Fund I and Fund II gave us invaluable lessons about where we are uniquely positioned to create the most value as we help lead Africa's way into the digital economy. Thus, going forward, we will double down on what we do best and invest in fewer companies at the earliest stages and in alignment with our T.I.M.E. thesis whilst providing hands-on support in the areas of storytelling, team building, product development, distribution/business development, and fundraising.

We are excited about the journey ahead of us. If you are keen to join us in the next Fund, please fill out our survey here

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