Investment firm Breega initiates $75 million funding for African startups, highlighting the wealth of possibilities on the continent.
In a move that could significantly bolster the African venture capital (VC) sector, Breega, a European venture capital firm, has announced the securing of $52m for a new $75m African fund. The fund aims to invest in major African startup hubs and expand its presence with new offices in Lagos, Nigeria, and Cape Town, South Africa.
The African VC landscape has seen a reduction in competition for quality deals, as mentioned by Marrel, due to the sluggish investments from US and European sources. Local VCs typically manage funds of $10-20 million, making Breega's new fund a welcome addition.
The new fund will focus on investments in agritech, edtech, and healthtech, as well as technologies supporting critical infrastructures like fintech, logistics and mobility, and energy and climate. Breega plans to issue seed-stage investments of $100k to $2m, reserving 30-40% of the fund for follow-on rounds.
The fund is supported by high-net-worth individuals, tech entrepreneurs, and institutions like French public bank Bpifrance and Dutch development bank FMO. Breega's expansion into Africa includes opening offices in Lagos, Nigeria, and Cape Town, South Africa, and the firm anticipates expanding its Africa-based team to as many as six people in the future.
Marrel notes that although the ecosystem has achieved a "minimum threshold" of funding, it is still limited. However, Africa's tech sector has seen significant growth in recent years. In 2022, the sector secured $3.3 billion, a significant increase from $195 million in 2017.
Breega has already demonstrated its commitment to the continent, having invested in nine African startups in the past two years, including Kenyan fintechs Sava and Kwara, and Ugandan digital loan provider Numida. The firm's expansion into Africa is highly focused on addressing the core needs that Africa is about to face, with the continent's population projected to grow from nearly 1.5 billion to 2.5 billion by 2050, presenting a significant investment opportunity.
It is uncommon to find a focused strategy with a dedicated fund and local presence in the African VC landscape, according to Marrel. Only a few European VCs focus on African startups, with French VC Partech running a $300m Africa-focused growth fund since 2017, and Stockholm-based Norrsken launching a $205m fund targeting the continent.
The final close for the fund is expected by the end of the year. Breega's two partners already based in Africa, Melvyn Lubega in Cape Town and Tosin Faniro-Dada in Lagos, will now oversee the firm's operations in these new offices. The global economic downturn in 2023 led to a drop in investments to $2.4 billion, but Breega's expansion suggests a renewed confidence in the African VC sector's potential.
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