Launch Africa is arguably Africa’s most lively early-stage investor. The agency began investing in African startups in 2020, and by the point it had completed deploying its $36.3 million fund, it had invested in 133 startups throughout 25 international locations and sectors, together with startups like Kuda, Omnibiz, and Julaya.
“When you take a look at our first fund, 90% are nonetheless operational—a formidable price for any fund in Africa,” Uwem Uwemakpan, Launch Africa’s head of funding, instructed TechCabal.
The agency is at the moment deploying its second fund and has already backed startups equivalent to VaulFi, an Algerian fintech, and Toum AI, a man-made intelligence startup. The second fund targets business-to-business (B2B) and business-to-business-to-customer (B2B2C) early-stage startups throughout the continent, with cheques between $250,000 and $500,000. The fund also can make investments as much as $1 million cumulatively via follow-on investments in just a few startups.
“We imagine B2B fashions provide extra sustainable progress, decrease acquisition prices, and clearer paths to profitability within the African context,” Uwemakpan mentioned, describing Launch Africa’s funding strategy. “We actively make investments throughout 5 areas, together with underserved markets in Central and North Africa. Our technique is rooted in disciplined, conservative decision-making. We’re not chasing developments or inflated valuations—we’re constructing a balanced portfolio with sound fundamentals.”
When you hear Uwemakpan inform it, Launch Africa was created to resolve 4 issues in Africa’s startup ecosystem: bridging the vital hole between seed-stage funding and Sequence A rounds—a stage the place many startups wrestle and infrequently fail to scale; bridging the data hole for worldwide buyers; and making a “extra structured pipeline for Sequence A buyers in Africa” by figuring out, funding, and supporting promising seed-stage firms.
Now, Launch Africa is elevating its third fund—however with a distinct strategy. This time, the fund will observe a mezzanine construction, providing a hybrid of debt and fairness financing.
“Fairness—or VC funding—is the most costly type of capital and for many founders on the continent, it’s not what they want. The actual challenge is the dearth of viable options,” Uwemakpan mentioned.
On this interview, Uwemakpan speaks concerning the pondering behind the third fund and the teachings from the primary two funds.
This interview has been edited for size and readability.
You’re elevating your third fund after deploying your second fund. Why will your third fund be mezzanine?
In our expertise, particularly in high-growth sectors, what’s typically wanted isn’t fairness however debt—working capital to maintain the enterprise operating and rising. That’s what impressed our third fund. We’re asking: how can we make investments utilizing debt devices, take significant possession stakes, and nonetheless place ourselves to exit at greater valuations and ship returns to our restricted companions (LPs)?
On the similar time, we need to recycle capital from one firm to the following with out relying solely on new fundraising. That’s the place a mezzanine fund is available in—a hybrid of debt and fairness. It permits us to deploy capital as debt, take fairness positions, and recycle repayments. As founders repay the debt, we are able to reinvest that capital into different firms. This flexibility is vital if we need to construct extra high-growth firms throughout the continent.
Wanting again, was there a defining second that validated your strategy to early-stage investing in Africa?
The defining second that validated our strategy got here throughout Fund I after we started seeing robust follow-on rounds for our portfolio firms, with worldwide buyers coming in at considerably greater valuations. This validated each our thesis and our means to determine promising startups on the seed stage.
One other validation got here via our B2B focus. Whereas many consumer-focused startups struggled with excessive buyer acquisition prices and difficult unit economics, our B2B firms had been attaining sustainable progress with clearer paths to profitability – precisely as our thesis predicted.
Probably the most highly effective validation, nonetheless, was seeing the actual financial affect of our portfolio firms – creating jobs, fixing vital infrastructure gaps, and demonstrating that expertise can certainly deal with basic challenges throughout Africa.
What sort of assist does Launch Africa give founders, given that you’ve got numerous startups in your portfolio, and the way do you measure the success of that assist?
I typically give this analogy: First-time founders will say their largest problem is entry to capital—and rightly so. However while you communicate with second or third-time founders, their considerations shift dramatically. They speak about recruitment points, inside tradition, advertising and marketing challenges, and board formation.
Given our intensive Fund I portfolio, we’ve recognized two major assist areas for founders: strategic assist and operational assist. Early-stage founders—post-angel or pre-seed—want very completely different assets than these making ready for a Sequence A spherical. For early-stage founders; we leverage relationships with company companions like MTN and different main corporates, connecting them straight with startups. These corporates typically grow to be prospects and even potential acquirers, serving to founders safe early revenues and validation. Whereas B2B gross sales cycles could be prolonged, as soon as closed, they’re helpful to our startups.
As a result of we’ve spent years constructing a strong community, we frequently co-invest alongside trusted companions and preserve shut relationships with later-stage buyers—Sequence A, B, and growth-stage funds. These relationships create a pure development for additional fundraising.
We additionally transcend easy introductions. We actively coach founders on pitch preparation, deck refinement, cap-table administration, and investor concentrating on. Impressed by non-public fairness fashions, we’ve applied a “protection mannequin”, assigning every workforce member a set variety of portfolio firms. This fosters deeper, one-to-one relationships, essential when founders face challenges. Founders who belief us sufficient to speak transparently, particularly in powerful instances, are the relationships we goal to construct.
We maintain common weekly workplace hours the place founders can brazenly talk about points or search steering. Our portfolio administration workforce additionally evaluations month-to-month founder stories, enabling us to proactively deal with points, provide help, or determine firms prepared for his or her subsequent funding spherical.
Lastly, having a big portfolio has allowed us to organically construct a founder group, fostering peer-to-peer studying and assist. Founders actively interact with one another, and we encourage this from the beginning by figuring out potential synergies in our funding memos.
Do you will have sector favourites or do you preserve a purely sector-agnostic stance?
Whereas we preserve a sector-agnostic strategy, the info and market dynamics naturally lead us to give attention to sure sectors. Our Fund I portfolio breakdown confirmed fintech main, adopted by market, huge information, healthtech, and logistics.
For Fund II, we’re seeing thrilling alternatives in sectors that had been beforehand under-represented. We anticipate stronger publicity to cleantech, given Africa’s vitality challenges and the worldwide give attention to sustainability; agritech, recognising the continent’s agricultural potential; and AI/huge information, as these applied sciences grow to be basic enablers throughout industries.
That mentioned, we don’t exclude any sector with robust B2B fundamentals. Our funding determination finally comes all the way down to the energy of the workforce, the dimensions of the market alternative, proof of traction, and alignment with our funding standards – no matter sector.
How do you identify the cheque sizes in your offers, and has that modified from while you began to now?
Our strategy to cheque sizes has advanced considerably since we began. In Fund I, we had been extra versatile with our funding quantities, typically writing smaller cheques to get publicity to promising firms or bigger ones for notably compelling alternatives.
For Fund II, we’ve grow to be rather more strategic and systematic. Our ticket sizes now common $250K, with the precise quantity calibrated to attain our goal possession. This possession goal is essential; it ensures we preserve enough fairness to meaningfully profit from profitable outcomes, even after dilution from subsequent funding rounds.
This modification was straight knowledgeable by our expertise with Fund I, the place we noticed that the efficient share holding in an organization considerably impacts the contribution of exit proceeds to the fund’s general returns. Firms the place we had bigger possession percentages made disproportionately constructive contributions to fund efficiency.
How do you strategy portfolio development by way of stage, geography, and sector distribution?
We take a really deliberate strategy to portfolio development, balancing danger and alternative throughout a number of dimensions.
For stage distribution in Fund II, we have now a weighted strategy that enables us to seize the worth creation on the seed stage whereas sustaining flexibility to assist our winners. Geographically, we preserve a balanced pan-African presence. This distribution is fastidiously calibrated based mostly on elements together with progress charges, foreign money stability, political surroundings, and ecosystem maturity in every area.
For sectors, whereas we’re technically agnostic, market dynamics and our B2B focus naturally create a distribution. Fintech stays important, however for Fund II, we anticipate stronger illustration from cleantech, agritech, and AI-powered options, whereas sectors like edtech might even see decreased allocation.
This balanced development offers us publicity to the continent’s most promising alternatives whereas mitigating focus danger. We evaluation and refine our allocation targets usually based mostly on market developments and portfolio efficiency.
What sort of inside processes or frameworks information you decide what number of and what startups to again every year?
We’ve developed sturdy inside processes to information our funding choices. On the core is our disciplined strategy: being disciplined and conservative, creating our offers, including worth past capital, aligning intently with administration groups, and specializing in superior returns.
Our funding course of begins with a rigorous deal funnel. Primarily based on our market profile and community, we anticipate to evaluation roughly 100-150 offers month-to-month, translating to 1,200-1,800 offers yearly and three,600-5,400 offers all through our three-year funding interval.
For valuations, we use a strategy that considers each qualitative and quantitative elements. This framework ensures consistency, self-discipline, and alignment with our general portfolio development technique.
A number of African startups at the moment are exploring secondary gross sales. How has Launch Africa participated in secondary exits, and what drives these choices?
We’ve seen rising alternatives for secondary gross sales in Africa’s ecosystem, notably for our Fund I portfolio firms which have demonstrated robust efficiency however will not be approaching a standard exit but.
Our strategy to secondary alternatives is strategic somewhat than opportunistic. We take into account secondary gross sales after they meet particular standards: first, the valuation should symbolize a significant return on our preliminary funding; second, the timing must align with our fund lifecycle; and third, we consider the potential future upside we may be foregoing.
In some circumstances, we’ve executed partial secondary gross sales, liquidating a portion of our holding whereas sustaining publicity to the corporate’s continued progress. This strategy permits us to return capital to our LPs whereas nonetheless taking part in potential future upside.
Are you seeing urge for food from later-stage buyers seeking to purchase out your positions in startups doing properly?
Sure, we’re seeing that. And to be trustworthy, that’s a extra sensible path to liquidity for our ecosystem. We’ll see extra secondaries, greater than we’ll see IPOs. I’m not a prophet, however secondaries are the trail of least resistance for liquidity. Although secondaries sometimes come at reductions, we see later-stage buyers intently linked to the expansion of those firms concerned about them.
What’s your most popular sort of exit—full acquisition, secondary buyout, or IPO—and why?
We preserve flexibility relating to exit pathways. Acquisitions are a sensible exit mechanism within the African context. Strategic acquirers—each regional champions and worldwide firms looking for African enlargement—have demonstrated constant curiosity in well-performing startups that clear up particular market challenges.
Secondary gross sales to later-stage buyers have grow to be more and more essential in our exit combine, notably for portfolio firms which can be performing properly however will not be rapid acquisition targets. These transactions permit us to understand returns whereas the corporate continues its progress journey.
IPOs stay extra theoretical than sensible for many African startups at this stage of the ecosystem’s growth. The restricted liquidity in native public markets and the numerous scale sometimes required for worldwide listings make this exit path accessible to solely a small subset of firms.
Our funding strategy accounts for this actuality. We give attention to constructing firms with clear strategic worth to potential acquirers. We additionally construction our investments and goal possession percentages to make sure significant returns regardless of the exit route.
How has your evaluation of danger versus reward modified over time?
As a greenhorn, I’d do issues strictly by the e book. However in Africa, cultural variations, infrastructure deficits, and authorities insurance policies imply the mathematics isn’t linear. I’ve realized to issue information and instinct, utilizing my head (analytical) and coronary heart (instinct and intestine feeling).
How does inflation or foreign money devaluation have an effect on your deployment of capital?
Nice buyers construct portfolios contemplating macroeconomic and geopolitical elements. We’re cautious given volatility however nonetheless make investments.
What classes out of your first two funds are influencing the way you construction and place your upcoming third fund?
Probably the most important lesson from our fund is the significance of possession percentages. In Fund I, we noticed that the efficient share holding in an organization dramatically impacts the contribution of exit proceeds to the fund’s general returns. This straight knowledgeable our Fund II technique of concentrating on as much as 10% possession from preliminary investments.
For Fund II, we’re constructing on these classes whereas adapting to the evolving African ecosystem. We’re additional refining our sector focus based mostly on efficiency information, rising our consideration to areas displaying the strongest unit economics and exit potential, notably these on the intersection of expertise infrastructure and conventional industries.
We’re additionally adjusting our geographic distribution based mostly on macroeconomic developments and ecosystem maturity. Whereas sustaining our pan-African strategy, we’re changing into extra selective about particular international locations inside every area based mostly on regulatory surroundings and market stability.
One other key lesson influencing Fund II is the significance of co-investor high quality. We’ve seen that firms backed by robust investor syndicates usually tend to efficiently elevate subsequent rounds and obtain enticing exits. We’re now extra deliberate about who we companion with from the preliminary spherical.
Lastly, the post-investment assist mannequin is evolving based mostly on information from our portfolio. We’re doubling down on the sorts of operational assist which have demonstrably accelerated firm progress, notably round enterprise gross sales, expertise acquisition, and strategic partnerships.
How is the fundraising local weather for African-focused funds altering, and the way do you intend to face out to international LPs?
The fundraising local weather for African-focused funds has grow to be considerably more difficult. Following the final enterprise capital contraction globally, LPs have grow to be extra selective, specializing in funds with confirmed monitor information and distinctive methods. This surroundings favours established managers with demonstrable returns over first-time funds.
For African funds particularly, there’s elevated scrutiny on exit pathways. LPs are asking harder questions on how investments will finally return capital, given the still-developing nature of the secondary, acquisition, and IPO markets on the continent.
Regardless of these challenges, we’re seeing variations in LP curiosity. Whereas some Western institutional buyers have pulled again from rising markets, we’re seeing elevated curiosity from growth finance establishments, impact-oriented buyers, and regional household workplaces who perceive the long-term structural alternative in Africa. We’re additionally seeing a rising variety of particular person retail LPs (Africans within the diaspora and folks concerned about Africa).
Launch Africa stands out to LPs via a number of differentiators. First, our disciplined portfolio development strategy demonstrates sophistication in fund administration. Second, our genuinely Pan-African presence offers diversification benefits over country-specific funds. Third, our B2B focus addresses professional LP considerations about exit pathways, as these firms sometimes have clearer routes to profitability and strategic acquisition.
Our monitor file of figuring out promising firms early and supporting them in profitable follow-on rounds speaks for itself. We’ve demonstrated a capability to generate robust markups throughout market cycles, positioning us properly even on this extra selective fundraising surroundings.
Which particular errors have formed the way you now deal with deal sourcing, due diligence, or post-investment assist?
In deal sourcing, we initially relied too closely on inbound alternatives, which proved to be biased towards founders with current investor connections. We’ve since developed a extra proactive strategy, constructing relationships with developer & founder communities, and ESOs to determine promising founders earlier.
In due diligence, we had conditions the place we could have overvalued technical capabilities whereas undervaluing business execution.
Our post-investment assist advanced after we noticed that firms the place we facilitated strategic shopper introductions considerably outperformed others. This led to a extra structured strategy to leveraging our community for business partnerships somewhat than focusing totally on fundraising assist.
We additionally seen that weak reporting practices masked deteriorating unit economics. By the point the problems grew to become obvious, the runway was too brief for significant correction. We made the error of not onboarding appropriately and emphasising the necessity for transparency in reporting originally of the connection
When you might begin Launch Africa once more, what would you do otherwise in these preliminary months or years?
If I might restart Launch Africa, I’d prioritise possession percentages from day one. Our expertise has conclusively proven that significant possession is the one largest driver of fund returns, but in our earliest investments, we typically accepted smaller positions that restricted our upside in profitable firms.
I’d additionally implement our structured due diligence and follow-on frameworks earlier. The self-discipline these processes carry to funding choices considerably improves determination high quality, however we developed them iteratively over time somewhat than having them in place from the beginning.
I’d additionally place even larger emphasis on co-investor high quality from the start. The composition of the investor syndicate drastically influences an organization’s means to boost follow-on capital, and I’d be extra selective about which co-investors we work with on early offers.
Lastly, I’d set extra express expectations with founders about reporting and communication. Firms that preserve disciplined monetary reporting and clear communication with buyers sometimes carry out higher and are simpler to assist.
How do you steadiness producing returns for LPs with contributing to the continent’s wider socio-economic growth?
I don’t see producing returns and contributing to Africa’s growth as competing targets. Somewhat, they’re mutually reinforcing. The businesses that ship the strongest monetary returns are exactly these fixing basic challenges at scale.
Our funding give attention to B2B and B2B2C enterprise fashions that enhance the effectivity of current industries naturally aligns with developmental affect. When a fintech platform permits small companies to entry working capital, a logistics resolution reduces the price of transferring items, or a healthtech firm extends high quality care to underserved communities, these improvements generate each financial returns and societal advantages.
We preserve this alignment via our funding choice course of. We search for companies addressing substantial market gaps with sustainable fashions, which usually means they’re fixing essential issues in ways in which prospects are prepared to pay for. This strategy ensures that affect is baked into the enterprise mannequin somewhat than handled as a separate consideration.
The time horizon of enterprise capital additionally helps this alignment. As affected person capital with a 7-10-year outlook, we are able to assist firms via the prolonged durations typically required to construct transformative companies in difficult environments. This endurance permits founders to construct correctly somewhat than slicing corners for short-term positive factors.
By producing robust returns via firms that create significant affect, we display that Africa represents a pretty funding vacation spot, finally attracting extra capital to the ecosystem and accelerating the continent’s growth.
Ten years from now, what does success appear to be for Launch Africa by way of each returns and ecosystem affect?
Ten years from now, success for Launch Africa might be measured throughout a number of dimensions, monetary returns that validate African enterprise as an asset class, a reworked entrepreneurial ecosystem, and lasting institutional affect.
On the monetary aspect, success means delivering top-quartile returns to our LPs throughout a number of funds, demonstrating constant efficiency all through completely different market cycles. We need to create a sample of profitable exits via numerous pathways – strategic acquisitions, secondary gross sales, and probably the primary technology of African tech IPOs. These outcomes may have attracted important new capital to the African enterprise ecosystem, each to our funds and to the broader market.
From an ecosystem perspective, success means having helped construct category-defining firms throughout a number of sectors which have reworked how enterprise is finished in Africa. Our portfolio will embody firms serving tens of tens of millions of consumers, using hundreds of individuals, and setting new requirements for complete industries. Lots of our founders may have grow to be ecosystem leaders themselves, investing in and mentoring the following technology of entrepreneurs.
Institutionally, Launch Africa may have advanced right into a multi-strategy agency with autos addressing completely different levels of the enterprise lifecycle. Our workforce will embody companions who started as analysts or associates, demonstrating our dedication to growing African funding expertise. Our funding frameworks and methodologies may have influenced how enterprise capital is practised throughout the continent.
Most significantly, we’ll have confirmed that disciplined, affected person capital deployed with deep native data can concurrently generate distinctive monetary returns and contribute meaningfully to Africa’s growth, making a mannequin that others can observe and construct upon.
