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TLcom Capital closes second fund at $154M to back early-stage startups across Africa | TechCrunch

TLcom Capital closes second fund at $154M to back early-stage startups across Africa | TechCrunch

Venture capital activity in Africa has shown resilience over the past six months, with major firms backing startups on the continent closing their funds despite the ongoing funding winter.

In the latest development, TLcom CapitalAn African VC firm with offices in Lagos and Nairobi and a focus on early-stage startups, has concluded fundraising for its second fund, TIDE Africa Fund II, totaling $154 million. The final close positions the firm as Africa's largest seed and Series A investor.

Oversubscribed Fund, The initial target is to close at $150 million., attracted the participation of more than 20 limited partners. Notable investors include the European Investment Bank (EIB), the Visa Foundation, Bertelsmann, and AfricaGrow, a joint venture between Allianz and DEG Impact.

This news comes two years and a few months after the announcement of TLcom Capital. First off $70 million of the second fund, matching the size of its first fund, TIDE Africa Fund I. While the broader slowdown affecting venture capital and startups globally has contributed to a prolonged period of fundraising, VC firms can count on a few positives. Managing Partner Maurizio Q told TechCrunch in an interview.

Notably, TLcom Capital closed the second fund in less time than its previous fund despite having twice the size. Caio attributes this to a better understanding and acceptance of venture capital in Africa among limited partners as a legitimate asset class. Additionally, a portfolio of companies that exemplified the firm's investment strategy contributed significantly to gaining investor confidence and support.

Unlike many VC firms that progress from backing startups in the pre-seed and seed stages to later-stage investments with later funding, TLcom Capital maintains a consistent strategy. The firm continues to prioritize early-stage opportunities, particularly in the seed and Series A stages, while also considering opportunistic deals in growth and later stages. For example, the investor backed 10 out of 11 companies from their first fund in Seed or Series A. Still, it has invested in later-stage follow-on rounds in both funds (a Series C investment in Andela, a unicorn provider of global job placement for software developers, and FairMoney, a Nigerian digital bank. (Participating in the Series B Extension Round.)

“We like to start early when the entrepreneur is raising seed or Series A and then stay with the entrepreneur during the journey and invest if we think the company deserves more capital deployment,” Caio remarked. Want to continue.” “That's because we build our portfolio in such a way that we back 20 to 25 companies that can be individually funded 'if everything goes well'.”

The managing partner further emphasizes that when TLcom evaluates early-stage opportunities, it assesses its portfolio companies' potential to generate 10-20x returns. The approach, he says, is to ensure that successful companies recoup losses and allow the firm to achieve 3-4x profits overall.

One way the firm can improve its risk in this regard is by backing repeat founders: Sam Shagaya (of uLesson and Konga), Etop Ikpe (Autochek and Cars45), and Grant Brooke (Shara and Twiga). ) come to mind. Despite past ventures not achieving the desired results, Caio says these founders gained insights that will help them avoid repeating past mistakes and make better decisions in their new ventures. “When things Don't go as planned, it's important to act quickly, pivot and move on to the next project, knowing that lessons learned will pave the way for future success.

Another is to invest in deals first, at the pre-seed stage. In 2020, TLcom Capital invested in AutoCheck and Okra at the pre-seed stage and has since followed suit. in the later rounds. Two years later, the firm started A preseed strategy which includes allocation. The $5 million will be distributed in smaller check sizes and a low-touch approach, thereby creating a pipeline to seed and its core strategy in Series A (up-skilling platform). Tall stack is its first recipient). A portion of the fund, $2 million, was also dedicated to co-investing in women-led startups. First Check Africa, a pre-seed fund focused on women. The firm says its commitment to gender balance is evident in its female-majority partnership and investment committee, where three out of five partners are women.

TLCom Capital, which focuses on traditional sectors such as fintech, mobility, agriculture, healthcare, education, and commerce, has already backed six companies with its new fund, which raised seed capital. Costs range from $1 million to $3 million. These include SeamlessHR, FairMoney, Zone, and Vendease. Additionally, the firm has added to its portfolio ILLA, a middle-mile logistics platform, and LittleFish, which enables payments and banking products for SMEs, making its first investments in Egypt and South Africa respectively. marks the

“For us, the Big Four markets have always produced the most valuable companies, so it was important to include Egypt and South Africa as our capital destinations,” Caio said, noting that TLcom's portfolio Prior to this, there have mainly been startups based in Nigeria. and Kenya, countries where the firm has expanded its operational capacity and expertise.

Multi-sector focused firms and other notable venture capital firms viz Norscan 22, Almada, Algebra Ventures And Party Africa Raised significant funding to bring African startups back from pre-seed to Series C. However, since these funds are invested at various stages of startup development, the focus will be on the exit opportunities they facilitate and provide tangible returns to their LPs. These findings contribute to driving the overall development of the African tech ecosystem.

“Africa should not just be about how much money is going out but also about the return,” emphasizes Caio. “We need global capital to look at Africa and think of it as a place where good investments can be made and the technology can create a lot of value. It's still to be achieved at scale, so that's our main focus. is the target.”

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