The future of fundraising in Africa, according to Andela and Flutterwave co-founder
Fundraising in Africa is no small feat, especially in the early-stages. This is worsened by a nascent VC industry in Africa that is tied up to Limited Partners, investment committees, and bureaucracies that are sometimes not in touch with what is happening on-the-ground. This is the frustration that led Iyinoluwa Aboyeji to launch The Fund For Africa’s Future (or colloquially known as Future Africa) in 2019. Having co-founded and led two successful startups, Aboyeji is a credible voice in the startup tech ecosystem, and can potentially disrupt the VC model as we know it.
Entrepreneur turned investor
Iyinoluwa Aboyeji knows the venture fund raising terrains all too well - at least from a startup point-of-view, having co-founded two of Africa’s top VC-backed startups, Andela and Flutterwave. After “retiring” from running one of Africa’s most-known startups, Aboyeji launched Future Africa in 2019, alongside Olabinjo Adeniran and Adenike Sheriff.
Future Africa defines itself as a platform that provides capital, coaching, and community for mission-driven innovators building an African future where prosperity and purpose are within everyone's reach. A key part of the initiative is an early-stage investment fund that aimed to back up to 20 founders with up to US$50,000 of capital each year. Yet with the COVID-19 outbreak and the associated global crisis, Future Africa had to adjust its plans, in a “pivotal moment of crisis and opportunity”.
The Fund For Africa’s Future - disrupting the VC model
Initially, Future Africa would just be a fund allocating capital to innovators, “playing the traditional venture capital game,” as Aboyeji put it. But once COVID-19 hit, Future Africa jumped in to assist its portfolio of startups, while many other VCs held back on account of scared Limited Partners (LPs) and restrictive investment committees. For most VCs, the typical route is to set up a fund, secure commitments from external investors (LPs) and hire investment bankers to manage the fund. However, this approach frustrated Aboyeji as he believes many of the LPs do not understand the intricacies of the ecosystems in which they invest in, and furthermore, do not provide much support beyond capital.
Aboyeji knows the challenges of building companies during tough economic times, and believes his Future Africa team is well-equipped to provide the nurturing startup need in such times. In response, the Future Africa Collective was launched in April - which offers qualified investors, who apply and are admitted, an opportunity to co-invest on a deal-by-deal basis through investment syndicates. Further to this, the firm launched the Future Africa Rolling Fund in July, its investment subscription product. This scheme allows investors to subscribe quarterly (up to US$10k) throughout the year as opposed to a venture fund that raises capital every few years.
The Future Africa Fund adds a competitive edge to the angel network model. Aboyeji asserts that the call-to-co-invest in the Fund introduces the right amount of competition into the process, as opposed to “collectivist thinking”. This venture capital model is relatively new for the continent, however, Future Africa employs this investment methodology alongside coaching and community support for its portfolio.
$1million investments in 9 African Startups for Q3 2020
Future Africa has gathered 125 angel investors from all over the world, who are interested in funding the innovators building Africa's future, with remarkable milestones being achieved by the third quarter of a turbulent year. Last month Future Africa announced it had invested, through its collective of angel investors, US$1 million in 9 companies, bringing the total number of investments as a fund to 28. These companies include: Bamboo, Eden, Releaf, Tambua Health, Indicina, Evolve Credit, Shara, Myawayhome and Stears. The US$1 million includes new and follow-up rounds, with ticket sizes ranging from US$25k to US$250k.
Based on this year’s numbers, Aboyeji projects that Future Africa will close up to 20 deals next year; however, the mission of Future Africa is beyond capital allocation. As he puts it, “we believe that especially as far as Africa is concerned, capital is not just a tool for creating and preserving wealth, it is also a weapon of innovation and revolution.”