TLcom Capital targets $150M for its second fund to spend money on 20 African startups – •

TLcom Capital, the Africa-focused enterprise capital agency identified to have made bets on Andela and Twiga, is elevating $150 million for its second fund focused at making early- and late-stage investments.

The agency has reached the primary shut of $70 million, in accordance with an announcement shared with •. It’s nearly the equal of what TLcom Capital raised within the TIDE Africa Fund, its first fund that achieved its first shut in 2017 and last shut in February 2020.

In an interview, managing associate Maurizio Caio advised • that the second fund is predicted to succeed in a second shut later this yr. When closed, it should signify the most important fundraising but for the two-decade-old agency, which has $350 million AUM throughout Africa and Europe with places of work in Lagos, Nairobi and London. It can additionally place the investor to change into one of many largest unbiased VC corporations totally devoted to the continent.

In early 2020, • reported TLcom Capital’s $71 million TIDE Africa Fund and the way the agency deliberate to spend money on 12 African startups from seed to Sequence B phases.

Nevertheless, the agency managed to spend money on 11 startups. They embrace Andela, Ajua, Autochek, Ilara Well being, Kobo360, Okra, Pula, Shara, Terragon Group, Twiga and uLesson.

Usually, VCs take 5 years to deploy capital after which one other 5 years to make follow-on rounds and in the end exit their portfolio corporations by way of acquisition or IPO. However in TLcom Capital’s case, it took three and a half years to deploy its capital, from late 2017 to mid-2021.

“The precise purpose why we stopped investing is that we have been making an attempt to know how a lot capital we wanted to assist these corporations going ahead in full-on rounds,” mentioned Caio. “So, we determined that we didn’t wish to spend money on one other firm, simply because we wished to succeed in a dozen corporations with out having sufficient capital for follow-on rounds.”

TLcom’s common funding per startup is round $6 million; nonetheless, it didn’t make investments exactly that quantity in a contemporary or follow-on spherical in any of its portfolio corporations. Its first African test was in Andela ($40 million Sequence C), method earlier than its first fund closed in 2020, and is the most recent stage at which TLcom invested; Twiga’s $20 million Sequence B in 2019 is one other.

TLcom Capital invested in seed and Sequence A phases for the opposite 9 investments. The agency has needed to make investments earlier in some instances, one thing unconventional for big funds in Africa. As an illustration, it invested in Okra and Shara after they had nothing greater than prototypes and led Autochek’s pre-seed spherical. Based on Caio, this stresses TLcom’s breadth in being the go-to investor for high-growth corporations pondering of elevating their first institutional test.

TLcom’s participation in main smaller rounds signifies the rising depth at which traders battle for offers today. From native traders equivalent to LoftyInc and Ventures Platform, which have sizable funds to take a position tremendous early, to world traders like Tiger International and Goal International making inroads from pre-seed to Sequence C, competitors inside Africa’s enterprise capital market is heating up.

That mentioned, TLcom–whose workforce contains Caio, senior associate Omobola Johnson, companions Ido Sum and Andreata Muforo— says it needs so as to add an additional 20 early-stage startups to its portfolio. Ticket sizes in these corporations will vary from $500,000 to $15 million.

The agency will most certainly tailor its fund construction like its first: a part of the capital for early-stage startups, whereas the remaining shall be for brand spanking new or follow-on rounds of corporations at progress and late stage. Its first test from the second fund was a lead funding in SeamlessHR.

All 12 of TLcom’s present portfolio corporations are based mostly in Nigeria or Kenya. With its new fund, TLcom will increase its focus to Egypt whereas making extra investments throughout East and West Africa, the agency mentioned.

As with most pan-African funds, TLcom has few native LPs: FBN Quest and Sango Capital. And whereas the remaining are international–AfricaGrow (a three way partnership between Allianz and DEG Impression), Bertelsmann, King Philanthropies, CDC Group, IFC, Proparco and Swedfund–Caio believes the native LPs doubling down on the fund is a noteworthy signal regardless of the disparity in LP origins.

“On this first set of traders, we’ve got two African LPs which are coming again with extra capital than the earlier time. However there’s nonetheless work to be achieved to draw extra African traders. Then once more, the vital factor is that the capital market is studying that Africa enterprise capital is a pretty area. And the truth that extra non-public traders notice that, with out having any institutional constraint to commit sources to Africa, could be very encouraging,” he mentioned.

TLcom’s focus nonetheless lies primarily in conventional sectors like fintech, mobility, agriculture, healthcare, schooling and e-commerce. Nevertheless, Caio advised • that the agency is keen to spend money on startups venturing into web3, crypto and DeFi, newer industries with many upsides the place African startups are on the identical enjoying discipline with different areas.

Through the years, TLcom-backed corporations have collectively elevated their revenues threefold since receiving cash from the agency. International traders equivalent to Owl Ventures, SoftBank and Index Ventures have additionally led follow-on rounds within the agency’s portfolio corporations. TLcom mentioned that these corporations have seen their valuations improve a median of 5x.

African startups raised greater than $4 billion in 2021, doubling from when TLcom closed its first fund. Reflecting on this elevated exercise, Caio urges founders to benefit from the brand new inflow of capital coming into the continent and obtain huge scale. 

“The large image is that we’re nonetheless very early in African VC regardless of elevating nearly $5 billion. That is the message to the entrepreneurs: Suppose huge, don’t attempt to second-guess, deal with the magnitude of the chance, as a result of if it’s compelling, you’ll discover capital to assist it,” he mentioned.

“Don’t fear about dilution; fear about how a lot cash you have to construct a really giant firm in a big market. Let’s take benefit collectively of extra capital coming into the area.”

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