Norrsken22’s debut fund closes at $205M to back growth-stage startups in Africa

These are exciting times for growth stage investing in Africa, as norrsken22, a pan-African venture capital firm, achieves the final close of its debut fund, raising a total of $205 million, exceeding its initial goal. This also highlights the strong interest of institutional investors in supporting African startups in an essential phase of their journey.

Norrsken22, founded by five people with extensive experience in venture capital and private equity, includes founding partners Niklas Adalberth and Hans Otterling, as well as managing partner Natalie Kolbe and general partners Ngetha Waithaka and Lexi Novitske. This venture capital firm, which has been in existence for almost two years, has operational teams in Nigeria, South Africa, Kenya and Ghana.

The partners launched the fund, called Norrsken22 African Tech Growth Fund, in January of last year after reaching the first close at $110 million. About 59% of the funding came from a consortium of 30 global unicorn founders, including Flutterwave CEO Olugbenga Agboola, Skype co-founder Niklas Zennström, iZettle co-founder Jacob de Geer, and co-founder by Delivery Hero, Niklas Östberg.

Norrsken22 began its fundraising at a time when there was a significant increase in capital flow into the technology sector. In addition to discussions with several development financial institutions (DFIs) and family offices, a prerequisite for raising a large fund in Africa, the company aimed to achieve final close by the end of 2022. However, the global technology investment landscape has seen a pullback since then, impacting fundraising efforts across the board, including institutional investors. In 2022, venture capital activity in Africa will reach between $5 billion and $6 billion. So far, in 2023, it has been reduced to a range of between 2.5 and 3.4 billion dollars (according to data from The big problem and British bridges), reflecting the decline in overall venture capital activity.

The current slowdown in technology investments caused a one-year delay for Norrsken22 to achieve its final closure. However, this achievement is noteworthy considering the challenges that many venture capital firms, both local and global, still face in raising or closing their funds. What’s even more impressive is that the growth fund was oversubscribed. Managing partner Kolbe attributes this success to the renewed fundraising momentum seen in early 2023. Additionally, the Norrsken22 founding team’s extensive experience in African investments, along with the support of other limited partners, primarily founders of unicorn startups, played An important paper. role in attracting interest and support for the fund, he noted.

After the initial closure of the fund, which was supported by SEB Pension Foundation and some family offices, Norrsken22 attracted companies such as British International Investment (BII), International Finance Corporation (IFC), US International Development Finance Corporation (DFC), Standard Bank and Norfund as new limited partners.

Invest in Series A and B rounds

International funds typically lead the majority of large deals in Africa, while local investors mainly focus on pre-seeding Series A rounds with smaller and mid-sized funds. Large Africa-focused funds like Norrsken22 aim to bridge the gap between growth and late-stage investments. Approximately 50% of Norrsken’s capital will go towards building its portfolio with Series A and B companies; The rest will be reserved for subsequent investments, mainly in rounds B and C, according to Kolbe.

In a statement, the firm said it is focused on “entrepreneurs who develop fintech, edtech, medtech [health tech], and market-enabling solutions that will generate strong returns and have a positive impact across Africa.” So far, the growth-stage pan-African fund has made five investments, including challenger bank TymeBank, B2B retail commerce platform Sabi, identity verification solution Smile Identity, auto financing platform Autochek and financing app for communities of informal traders. shara.

“The type of value we bring is for companies that are looking to grow beyond their borders and develop pan-African businesses in multiple countries. By having three general partners in the lighthouse economies of sub-Saharan Africa – Nigeria, Kenya and South Africa – we were able to provide companies with people and networks on the ground, and we also understand the nuances of growth and opportunities in each of our markets,” he said. Kolbe on Norrsken22’s investment strategy. “Also, these are startups looking for an investor who can write a big check and can follow up on future rounds and anchor those rounds. “This has become very important, particularly as liquidity becomes a little tighter on the continent.”

Norrsken22’s goal remains to invest in approximately 20 startups. The fund’s typical investment ticket size averages around $10 million. However, it could reach up to $16 million, encompassing follow-on rounds in select portfolio companies, as the partners discussed in a previous interview.

Thinking about exits

Like Norrsken22, several other growth-stage companies, including Partech Africa, TLcom Capital, Algebra Ventures, Sawari Ventures and Novastar Ventures, have raised one or two funds in recent years to address the Series A capital shortage and beyond. . However, some of them have also invested upstream and early stage, a possibility that Norrsken22 may explore if the right opportunity arises. “We have reserved a small amount for the initial opportunistic phase. If we get something that looks interesting, we can invest small amounts of capital, but that’s not where we focus at all,” Kolbe said.

In fact, a key focus in a growth-stage fund’s investment strategy is preparing portfolio companies for exits. According to the general partner, Norrsken22 carefully evaluates potential exit scenarios, including working to identify potential buyers for its portfolio companies and evaluating the valuations they could offer at the end of their investment period. This diligence is critical and the company has rejected investments where a compelling exit case was not evident, he added.

The managing partner states that the company is seeking exits for its portfolio companies through international strategic buyers and consolidation involving local industry leaders. Large multinational corporations in Africa could also present exit opportunities for startups. Some of these companies often struggle to innovate internally and may pursue innovation by acquiring technology companies, which may be integrated into their operations or maintained as separate entities under a different brand. Norrsken22’s debut fund is backed by an advisory board of business leaders from multinationals in the banking, telecommunications, agriculture and real estate sectors.