From Here Ventures Newsletter; Q1 2024 Edition

Join us on this journey of discovery as we explore the latest developments from our portfolio, the broader funding landscape, and insights shaping our approach to venture capitalism in Africa.

AGENDA
 

1. Introduction
2. Portfolio Highlights
3. Industry Insights
4. Events and Engagements
5. Expert Opinions
6. Conclusion

Introduction

Welcome to the latest edition of the From Here Ventures (FHV) Newsletter! If you missed the previous one, find it here, as it will also provide context. As we navigate the changing tides of the African startup ecosystem, we're excited to bring you insights, updates, and stories highlighting this vibrant landscape's resilience, innovation, and potential.
 

Portfolio Highlights: 

In Q4 2023, we added Zemo, a corporate expense management solution. In Q1 2024, we added Giftpesa, an e-voucher and gifting platform. Let's catch up with our portfolio's latest achievements:
 

Industry Insights:
 

• Overall Funding Decline: There has been a significant decrease in total transaction value, with a 27% drop quarter over quarter and a 47% drop year over year, totalling $466 million.
   
• Geographical Concentration: A large portion of the funding (87%) was concentrated in the Big Four countries: Nigeria (35%), Kenya (24%), South Africa (16%), and Egypt (12%).
   
• Leading Start-up Spotlight: The start-up Moove, operating in the transport and logistics sector with headquarters in Nigeria, secured $100 million in equity and an additional $10 million in debt, reaching a new valuation of $750 million.
   
• Sector Analysis: The transport and logistics sector led the funding amount, with a total of $151 million raised, accounting for 32% of the total amount raised in the top 5 sectors.
   
• Funding Distribution by Gender: There is a significant gender gap in funding, with start-ups having at least one male founder receiving 99% of the funding compared to 15% for start-ups with at least one female founder.
   
• Funding Type Preference: Equity funding was preferred over debt, with 71% ($332 million) of the funding being equity (despite a 47% year-over-year decline) and 28% ($132 million) being debt.
   
• Top Sectors by Deal Numbers: Fintech leads the number of deals over $100k with 30 transactions, followed by agriculture & food (19), energy (15), transport & logistics (14), and healthcare (13).
   
• Significant Deals in Other Sectors: Notable raises include ROAM operating in transport & logistics in Kenya with $24 million and Hewatele in healthcare in Kenya with $20 million.
   
• Regional Opportunities: Other countries attracting significant funding include Uganda ($16 million), Ghana ($10 million), Tanzania ($9 million), and Morocco ($7 million), indicating a growing interest in diverse markets within the continent.

Events and Engagements: 
 

Over the past quarter, we enjoyed being invited to a few ecosystem events, including: Safaricom’s Spark Accelerator launch, Speed Pitching Event by KPMG Private Enterprise, Austrian - Kenyan Business Circle, Delta40 Studio Lunch and Investors’ Breakfast Meeting By Innovate Now.
 

Consider LaunchPad Innovation Campus for your Events and Engagements.

Expert Opinions:

In our expert opinion section for this quarter, we feature insights from our General Partner on the current landscape of venture capitalism in Africa, with a nuanced perspective on the industry's cyclical nature and the unique opportunities on the continent.

Navigating the Cycle of Opportunity in Venture Capital

Venture capitalism has once more arrived at the threshold of opportunity, a familiar terrain discovered in the aftermath of speculative bubbles. History has demonstrated that eras of innovative destruction often give rise to venture-building opportunities. Post the dot-com bubble, we witnessed the advent of the cloud, social media, and mobile revolutions. Similarly, the financial crisis of 2008 heralded a burst of entrepreneurial activity, spawning companies like Uber, Airbnb, and Stripe.
 

This pattern indicates that the optimal moment for venture-building ventures is during market corrections, and we currently find ourselves in such a promising era.
 

Africa: The Untamed Frontier for Progress

Africa remains a landscape ripe for progression, with technology poised to have an unprecedented impact coupled with substantial returns on investment. There are significant structural and institutional voids that entrepreneurs are uniquely positioned to fill. In this environment, established industry players, many of whom originated before the digital age, are particularly vulnerable to agile, internet-native entrepreneurs ready to cater to a rapidly evolving demographic.
 

Despite its excesses, the venture bubble of late 2021 served to catalyse Africa’s technological ecosystem, drawing a plethora of talent into startups. This influx has permanently embedded the entrepreneurial spirit in the continent's talent pool, which reached unprecedented levels with $16 billion invested in African startups between 2017 and 2022, primarily directed towards human capital development.

Talent: The Keystone of Venture Building

The crux of venture building lies in talent—from visionary founders to skilled operators—who collectively make the improbable, possible. The recent trend of startups undergoing restructurings or closures has made such talent more available, offering a fertile recruiting ground for new entrepreneurs to strengthen their teams.

A newfound philosophy focused on pragmatism and fundamentals has taken root in the startup domain—a philosophy that resonates deeply with the realities of entrepreneurship in Africa, where only the essential thrives.
 

As the fervour of Silicon Savanna quiets, authentic signals emerge from the noise, presenting diligent investors with a rich hunting ground.

Promising Pipeline Despite Market Corrections

In the past six months, the quality of opportunities crossing our desks has been exceptional, propelled by pragmatic founders who have not only endured the funding winter but have flourished. This pipeline includes ventures poised to become robust, profitable businesses or potentially industry-defining entities.

Market Insights for Sustainable Venture Growth in Africa

Focusing on primary market dominance is pivotal for successful venture building in Africa. Premature geographic expansion is a frequent misstep leading to failure. A methodical approach to scaling—one that establishes a robust, ideally self-sustaining base in the home market—is essential before considering cross-border growth. This patient growth strategy remains critical in an environment where valuations often overshadow fundamentals.
 

Learning from Failure to Strengthen the Ecosystem

The contraction in funding has led to numerous shutdowns, but with these setbacks comes a wealth of experience. This has seeded the ecosystem with the knowledge to inform more successful future ventures.
 

Maintaining a Robust Pipeline Amidst Shifts

We continue to observe a pipeline brimming with fundamentally solid startups, led by grounded entrepreneurs. Many have adopted a bootstrap mentality, with some reaching profitability and seeking growth capital at strategic times.

Local Capital Awakening to Venture Prospects

While it's often said that startups require more than just financial support, the ancillary benefits of seasoned investment and advice are still emerging. However, the local angel and VC communities are gaining momentum, promising for the ecosystem's maturation. Initiatives like Lokal Capital are catalysing this growth.

Investing in Africa's venture space is opportune but demands a nuanced understanding of local dynamics, the courage to defy conventional wisdom, and a long-term commitment to the continent's future.
 

Conclusion:

As we conclude this edition, our journey through the African startup ecosystem continues to be one of discovery, innovation, and growth. From Here Ventures remains dedicated to investing in the future, supporting transformative startups, and contributing to a vibrant and inclusive economic landscape.

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Thank you for your time. Until next time!