LoftyInc Capital, a pan-African venture capital firm, announced today that it is launching its third fund, LoftyInc Afropreneurs Fund 3, at $ 10 million for technology startups in Africa..
The firm has reached the first closing of $ 5.5 million. Some of the vehicle’s limited partners include those in its second fund, FBNQuest Funds, Camac, The Green Investment Club syndicates, HNIs of multinationals like Google, Facebook, and ExxonMobil; and Andela CEO Jeremy Johnson, among others.
So far, LoftyInc has written checks to more than 20 startups since it began raising money for the fund. They traverse various industries such as e-commerce, fintech, healthcare, logistics, and media in different regions within and outside of Africa..
In Francophone Africa, the company has invested in Afrikrea and Star News Mobile. Then Omnibiz, RXAll, Sudo Africa, Tech Advance, Aladdin, Flex Finance, Star Kitchens Group and EPump in West Africa.
For the LoftyInc portfolio in North Africa, there are Odiggo, Illa, Tagaddod and Instadiet. Akiba Digital, Beamm and Zazu Africa make up LoftyInc’s portfolio in South Africa, while Cashback and Dash are the funded startups in East Africa. LoftyInc also has Diasporan interests in OjaExpress and FitMatch.
LoftyInc manages three funds simultaneously. The second fund, which is your first formal venture capital fund, is primarily focused on Nigeria.. On the other hand, this third fund follows the thesis of the first LoftyInc fund: investing in startups in different markets and sectors in Africa and the diaspora.
The fund says it wants to make big bets in markets outside of the Big Four: Nigeria, Kenya, South Africa and Egypt.
Operating three funds
A month ago, TechCrunch covered one of Africa’s biggest angel investors, Olumide Soyombo. He is one of the few giants in a game that includes the founder and general partner of LoftyInc. Idris Bello.
Bello likes to describe his 12-year foray into technology and entrepreneurship as a “business entrepreneurship journey.. ” While in business school in the US, he realized that the next wave of innovation that Africa as a continent needed rested on the shoulders of promising founders..
With that in mind, Bello began Allied partners of LoftyInc together with other entrepreneurs as a business development company. That spun off a tech hub and business accelerator called Wennovation Hub and also a business arm called LoftyInc Capital.
In 2012, the firm launched the first fund, LoftyInc Afropreneurs Fund 1, as its pre-seed stage investment vehicle. The fund acts more like a syndicate or angel group in which investors include senior executives from key industries in Africa.
More than 180 business angels are investing through the first fund and have collectively invested more than $ 4 million in more than 40 startups across the continent. Some big names of Nigerian and Egyptian origins include Unicorn Flutterwave (pre-seed), Soonicorn Andela, Trella, Chefaa, and Koniku.
Five years later, as a founding partner, Bello partnered with longtime advisor Marsha Wulff, an early investor in the healthcare technology company Teladoc. They launched the second fund, LoftyInc Afropreneurs 2 Fund, with Michael Oluwagbemi, who also acts as the firm’s general partner.
From 2017 to 2020, LoftyInc issued checks worth more than $ 1.2 million in nine rounds to six Nigerian startups: Printivo, RelianceHMO, Epump, YouVerify, Shyft Power Solutions and Flutterwave (before Series A).
Flutterwave serves as LoftyInc’s first outing, one that according to Bello returned 3x to his LPs. It was this successful outing that laid the foundation for the third pool.
“When we exited our Flutterwave stake in February, our LPs wanted us to raise and raise another fund because we made a profit from them. At first, we wanted to make a fund of $ 2.5 million, but after consulting with LPs, it increased to $ 4 million. Later Finally U.S only decided to make $ 10 million, so we could invest in more startups, “Bello told TechCrunch.
But when you look at Bello’s state of the African tech ecosystem and what similar Africa-focused funds are raising these days, one may wonder why the investor isn’t raising more..
His response to that:
“I always say this: my approach is very different. I’m pretty organic, which is evident in how we went from a group of angels to LP. I feel once you get 50-100 million dollars, your problem becomes a good implementation, especially in Africa. And what I’m doing is building a smaller base for a pyramid so that when I’m raising a big fund, it’s not a problem to deploy the funds. “
Another point he makes has to do with the limited partners involved. Most of the firm’s LPs in this third fund hold executive and managerial positions in banks and other multinationals. Bello argues that if Fund 3 can deliver on its promise to generate fantastic returns for these individual LPs, it will be a no-brainer onboarding the institutions they work with to get a larger fund..
“We want to build an ecosystem of African investors. After that, we will begin to strengthen the institutions so that they also participate in making investments. “
LoftyInc has a solid transaction flow and views around 30 decks per week, according to Bello. He says the fund receives so much flow because the founders of the new portfolio companies are the strongest source of company ownership deals.. And that’s what he believes sets LoftyInc apart from other venture capital firms.
For example, in a brief chat with TechCrunch, Andela CEO Jeremy Johnson mentioned that before anyone knew about his startup, LoftyInc had already backed him.. And for him, it only makes sense to do the same by searching for deals and investing in the fund.
In addition, the firm, through its first fund, also has a large investor base of African origin that lives inside and outside the continent. According to Bello, this network of angels also serves as risk scouts for the company.
“Generally, we invest before any major investor, we take the hand of new founders, we look for their initial clients within our extensive portfolio of more than 65 African startups and our large network of angels and LPs based in Africa..
“We also provide meaningful presentations to experienced regulators, partners, mentors, top employees, and board directors.. Plus, the founders want us in their deals because they’ve seen us attract early and downstream investors to earlier companies. “
In terms of what LoftyInc looks for in the companies it invests in, there is a bias towards those looking for a large market with little to no competition, a product that users love, and the execution.
As with most venture capital firms, LoftyInc claims to be industry independent. Nevertheless, there is some affinity with startups playing in the IoT, fintech and healthtech space, Bello said.
The first LoftyInc fund, mainly Served by angel investors, it is more optimistic in the pre-seed stage. This year alone, the group has made more than 50 pre-seed deals. For the others, the focus is on the seed of Series A deals with an average buy-in size of $ 250,000.
While LoftyInc’s target for Fund 3 is $ 10 million, Bello tells TechCrunch that the company expects to achieve a final close above that figure before the end of the fourth quarter of 2021..