Surayyah Ahmad, a two-time cofounder, has launched a brand new SME fund, Sabou Capital, to bridge funding gaps in Anglophone and Francophone Africa. The SME fund will make investments between $350,000 and $1.5 million in 25 late pre-seed to Collection A SMEs in agriculture and agroprocessing, renewable vitality and local weather, provide chain, logistics, and mobility sectors.

The identify Sabou is derived from “Sabo,” a Hausa phrase that means rebirth or renaissance, blended with a French tonation. The fund is taking a unique strategy from conventional enterprise capital corporations, concentrating on SMEs which might be primed for scale however lack structured monetary assist. In contrast to funds centered on high-growth tech startups, Sabou, which kinds itself as a micro-private fairness agency, is investing in companies that use expertise to enhance operations somewhat than being purely tech-driven. 

Ahmad, who co-founded Aduna Capital, mentioned variations in imaginative and prescient at Aduna Capital—which stays lively as an angel funding group in Northern Nigeria—led to the creation of Sabou Capital, with a broader deal with SMEs in secondary cities throughout Nigeria, Senegal, and Côte d’Ivoire.

“Our group was nicely aligned on the ‘what’ and the ‘why,’ which many co-founders contemplate essentially the most essential, whereas little focus was given to the ‘how,’” mentioned Ahmad. “This was a studying level for me as I found that even the size of affect one desires to make differs from individual to individual.”

The fund expects a modest 2-3x return on funding—nearer to the 3- 5x vary typical of personal fairness—in comparison with the high-risk 10x expectations of enterprise capital. By concentrating on firms that fall outdoors the normal VC mannequin, Sabou Capital will compete with non-public fairness corporations similar to Aruwa Capital, Afrinvest, and Catalyst Fund.

“We’re extra of a hybrid— SMEs with development potential, not essentially VC-scale, however with unmet demand that may leverage funding and technical help to develop. Consider us extra like a micro-PE,” he mentioned. 

Sabou’s differentiated strategy furthers an argument that almost all African startups don’t match the mould of the everyday enterprise capital mannequin. 

“As a result of most firms on the continent are literally SMEs and don’t match into the definition of VC-backed firms,” Ahmad mentioned. “There are a couple of which might be VC backable, however then that can imply most traders backing the identical firms with no differentiated portfolio.”

The fund can be adopting a gender-lens funding strategy, prioritizing funding for girls entrepreneurs. 

“For each greenback invested in a girl, the return is 2x,” Ahmad famous. “But girls face disproportionate obstacles to funding. They usually lack the networks and sources to exit and lift capital.”

Ahmad, who beforehand struggled to entry funding as an SME founder in Northern Nigeria, understands these obstacles firsthand.

“It wasn’t doable for me on the time to journey to Lagos for fundraising. I ended up elevating from a household workplace in Northern Nigeria, which in the end led to promoting my firm earlier than we have been prepared,” he mentioned. 

To assist its portfolio firms, Sabou Capital will provide technical help to make sure companies have robust company governance, monetary administration, and operational programs in place earlier than deploying funding. 

“We offer assist to ensure these companies are investment-ready,” Ahmad mentioned.

A crucial a part of Sabou’s technique is the addition of Christian Amouo, a personal fairness skilled with deep experience in Francophone markets, as a basic associate. Amouo beforehand launched his fund in Cameroon, investing in 4 firms, three of which stay operational.

Whereas Nigeria stays a key market, the agency is diversifying danger by investing in Senegal and Côte d’Ivoire—economies with projected annual development charges above 6% and currencies pegged to the Euro. 

“As Nigeria grapples with excessive inflation, foreign money devaluation, and slower development, we determined to leverage the experience of the founding group to diversify our danger,” Ahmad mentioned.

Sabou Capital has but to start formal fundraising however plans to launch a roadshow in July. With 20 startups already in its pipeline, the agency goals to shortlist two to 3 for its first spherical of investments. 

“The purpose is to scale this mannequin throughout West and Central Africa,” Ahmad mentioned, stressing the fund’s long-term imaginative and prescient to show SMEs into giant enterprises and exit to bigger non-public fairness corporations or strategic consumers.

*Editor’s observe: The article has been up to date to replicate that the fund will make investments as much as $1.5 million.