EIB Global pumps Sh4.8 billion in Seedstars Africa Ventures I fund

January 10, 2024January 10, 2024 James Wambua

The landscape of innovative businesses and start-ups in Kenya and across Africa is set to undergo a positive transformation with the infusion of a US$30 million (about Kes4.8 billion) equity investment from EIB Global into the Seedstars Africa Ventures I venture capital fund.

This financial boost aims to enhance access to risk capital for ventures, fostering a conducive environment for growth and development. The move will not only empower businesses but also catalyze the creation of skilled jobs, fostering prosperity across Africa.

With a specific focus on companies engaged in the development and implementation of digital technologies, the Seedstars Africa Ventures I fund is poised to make a lasting impact on sectors that address core needs such as education, healthcare, and utilities.

By supporting businesses in these critical areas, the fund seeks to elevate the quality of products and services available to businesses and consumers alike, ultimately contributing to the improvement of overall societal well-being.

Africa’s entrepreneurial spirit

This venture capital initiative represents a pivotal step towards unleashing the full potential of Africa’s entrepreneurial spirit, fostering innovation, and driving positive socio-economic change.

“Encouraging and promoting innovation and digitalisation is crucial to developing strong and sustainable economies,” said EIB Vice-President Ambroise Fayolle.

“African entrepreneurs hold the key to the continent’s future, creating jobs, reducing inequality and improving quality of life. The EIB, as part of Team Europe, is committed to supporting African businesses, and we are proud of the success of Boost Africa and the ACP Trust Fund.”

Maxime Bouan, Tamim El Zein, and Bruce Nsereko Lule joined forces to establish Seedstars Africa Ventures I, collaborating with Seedstars, a global organization dedicated to investing in and supporting entrepreneurs from emerging markets. This venture was further supported by LBO France, a multi-country multi-specialist investment platform.

LBO France not only seeded the initiative but also made a substantial anchoring commitment, leveraging its 30+ years of investment experience in small and venture companies, coupled with expertise in environmental and social governance (ESG).

The Nairobi and Paris-based team said “the anchoring ticket provided by the European Investment Bank is a testament to our investment thesis and the work we do across Africa. It signals the relevance of our positioning as well as the effectiveness of our support to portfolio companies. This recognition will further help us onboard both African and foreign investors in the Fund to reach our US$80 to US$100 million target size.”

Highly dynamic sectors

Robert Daussun, Chairman of LBO France and Stéphanie Casciola, CEO of LBO France stated, “Identifying areas with high growth potential is at the heart of LBO France’s strategy, and we have been reinforcing our position in Africa by targeting highly dynamic sectors and supporting disruptive entrepreneurs. We took in 2023 a majority position in CGF Bourse, a brokerage and asset management firm headquartered in Dakar and we are also the majority shareholder in Joliba Capital, a private equity fund based in Abidjan and focused on francophone Africa.”

“Kenyan and African digital economies have tremendous potential and helping entrepreneurs access finance can be a game changer to foster quality growth and jobs, a common priority for both the EU and our African partners. With Global Gateway, the EU is investing in Africa’s digital transformation and helping provide the right conditions for digital economies to thrive – as demonstrated with the recent digital economy package in Kenya,” said European Commission Vice-President Margaritis Schinas.

In 2022, venture capital investments in Africa surged to US$4.8 billion, marking a remarkable +270% increase compared to the US$1.3 billion invested in 2019. Despite this substantial growth, a notable equity gap persists, particularly in the early stages of funding across the continent.

This underscores the need for an increased presence of investors in this space. Addressing this gap, Seedstars Africa Ventures actively participates in Seed+ and Series A rounds, offering the flexibility to provide significant follow-on investments, effectively bridging the existing capital pools.

The Fund not only takes the lead in investment rounds to facilitate syndication but also fills a crucial operational support void within the regional venture capital landscape. In addition to its dedicated on-the-ground teams, the Fund uniquely harnesses the support resources available through Seedstars’ acceleration platform.

The Fund anticipates achieving a first close early this year, having already executed four transactions with Beacon Power Services, Poa! Internet, Shamba Pride, and Bizao. Each of these companies is dedicated to developing innovative solutions to address some of Africa’s most pressing needs.

For instance, Beacon Power Services (BPS), based in Lagos, has created proprietary grid management software and data solutions tailored for Africa’s power industry. BPS aims to enhance the reliability and quality of the continent’s energy supply by implementing smart grids, leveraging extensive on-the-ground data.

Grid energy losses

As of September 2023, BPS collaborated with four utility companies in Nigeria and Ghana, connecting to a population of over 60 million, resulting in a notable 25 percent reduction in grid energy losses for each utility. In Lagos alone, this translated into an additional three hours of daily energy per household.

The improved access to grid electricity also enables homes and businesses connected to BPS’ clients to reduce reliance on diesel generators, estimated to have saved 1.7 million tons of carbon dioxide in 2023.

Over the past 18 months, worldwide challenges have heightened the difficulty for companies to secure financing, especially during the initial stages of business development. This hurdle has impeded the growth of innovative technology firms.

Promoting the development of the private sector and the digital economy holds the potential to foster inclusive economic growth, thereby mitigating economic and social inequalities. The digitalization of many African countries is integral to their economic and social progress and aligns with a fundamental component of the European Union’s Global Gateway strategy.

The investment of US$30 million from EIB Global is backed by the EU, with US$20 million sourced from the ACP Trust Fund and an additional US$10 million from the Boost Africa program. This infusion of funds signifies the complete deployment of Boost Africa by the EIB, a program initiated in 2016 to enhance sustainable job creation and prosperity through venture capital for African entrepreneurs.

Under the umbrella of Boost Africa, companies receiving investment from Seedstars Africa Ventures 1 will also gain access to technical assistance aimed at fostering business skills and expertise, financed by the EU.