The Paris-based venture capital firm Breega is setting up a $75 billion fund to invest in early-stage startups in Africa.
Over the years, the mentioned firm has closely and in detail observed the development process, which can also be described as the evolution of the technological ecosystem of the specified continent. As for this ecosystem, it has gone a significant way from receiving less than $1 billion in venture capital per year to a record $6 billion over the same period. Moreover, the result of the development process was an increase in the number of fast-growing companies from one so-called unicorn to seven in three years. In this case, it is worth noting that unicorns are called startups worth more than $1 billion.
Currently, the venture capitalist, based in Paris and focusing its activities, among others, on Africa, intends to direct the funds to a $75 million fund to provide financing to startups from the mentioned mainland that are in the early stages of existence. It is worth noting that the term startup is de facto used to refer to a company whose history is just beginning. As for the concept of an early stage in this context, it means firms that are taking the first steps within their business and have not yet managed to make significant progress even within the initial stage of existence.
During a conversation with journalists, Breega representatives stated that at the first closure of the fund, the company secured commitments in the amount of about 70% of the capital. The history of this firm’s presence in the venture capital market began in 2015. Since then, the company has raised four funds: a first seed fund (€45 million ($48.2 million), a second seed fund (€110 million), a first venture fund (€106 million), and a second venture fund (€250 million).
In less than ten years, the French investor, who has a portfolio of more than 100 startups in 15 countries, has reached $700 million in assets under management.
The Africa Seed I Foundation is the first Breega foundation to operate outside Europe and the launch of which coincides with the opening of two new offices in Lagos and Cape Town, the main hubs of Africa’s technology ecosystem. The company also has offices in London, Paris and Barcelona. Currently, Breega is strengthening its presence in the EMEA region (Europe, the Middle East, and Africa).
The company prides itself on being a founders-for-founders fund, investing across pre-seed to Series A stages. Breega co-founder and CEO Ben Marrel, during a conversation with media representatives, said that the company’s goal is to back the founders in areas where innovation is thriving and new opportunities are opening up. Also in this context, he separately noted that Breega brings its experience, since all team members, according to him, were on the other side as founders and operators.
Ben Marrel says that the firm’s approach, combined with a dedicated scaling and portfolio support team, has allowed it to become one of the fastest-growing venture capital companies in Europe. Now Breega intends to replicate this success in Africa.
The launching of a fund for startups at an early stage is largely related to the desire to use the potential of the specified continent as a space for the development of a technological ecosystem. To achieve this goal, the most rational and constructive solution is to partner with local startups who understand the dynamic of the market and can make informed investment decisions. A similar strategy of action is followed by large companies with a kind of European business background and focused on Africa. For example, the corresponding approach is typical for Partech and Norrsken22.
Melvyn Lubega and Tosin Faniro-Dada are leading Breega’s Africa fund.
This fund has received backing from organizations such as Bpifrance and the Dutch entrepreneurial development bank. Both partners have ten years of entrepreneurial and operational experience. Melvyn Lubega is co-founder of the edtech unicorn Go1. Tosin Faniro-Dada was the CEO of Endeavor Nigeria.
Breega intends to invest between $100,000 and $2 million in startups in four major African markets, including Egypt, Kenya, Nigeria and South Africa. The company also has business plans for Francophone Africa, which includes Senegal, Morocco, Ivory Coast, Cameroon, and the Democratic Republic of the Congo.
Melvyn Lubega, while talking to media representatives, stated that he was struggling to find African investors who were able to build a business without raising money. In this context, it was noted separately that many entrepreneurs value having a sparring partner who has been there and done that before. He stated that Breega is committed to being the first check in startups, coming in quite strong and leading rounds at pre-seed and seed.
More than a quarter of the company’s team is solely engaged in backing portfolio brands in various sectors, including go-to-market strategy, talent management, governance, brand, and communications. Melvyn Lubega says that this commitment allows Breega to offer more than just capital. He noted that the company provides its entrepreneurs with experienced sparring partners who have international exposure and knowledge about ecosystems.
Tosin Faniro-Dada stated that Breega, as part of its activities in Africa, is interested in industries that can have a transformative impact on solving the current and future challenges across the mainland, especially in the context of the expected growth of the local population. In this case, the company pays special attention to fintech, healthtech, proptech, logistics, and edtech. Melvyn Lubega also underlined that Breega is targeting industries that have the most significant impact according to the Sustainable Development Goals (SDGs). Moreover, he said, Breega pays attention to areas of activity where it has significant experience backing more than 100 firms. Separately, he stated that the company’s approach to operating in Africa is based on the conceptual basis, which consists of knowledge about success in Europe and the United States. Breega intends to determine in which industries or industry segments effective opportunities coincide with its experience.
Tosin Faniro-Dada, during a conversation with media representatives, stated that the company has partners in Africa who understand the problems of various markets. She also noted that Breega invests in startups not because they are similar to their counterparts from Europe or the United States. According to her, the company is focused on solutions that solve unique problems specific to Africa and the diverse markets of this continent. She underlined that Breega intentionally backs solutions tailored to meet local needs.
Tosin Faniro-Dada also stated that one of the advantages of the company is the experience of its European team. This experience helps the firm come to an understanding of whether Africa is currently located as a technological ecosystem or as a business space at the point of development where Europe was decades ago. The European team has witnessed a corresponding evolution. At the same time, within the framework of activities in Africa, the mentioned experience needs to be adjusted taking into account what can be described as regional specifics, including the market condition and solutions that are most relevant and necessary.
Ben Marrel says that the company’s team of specialists working on the specified continent is fully integrated into the corporate culture of the brand, team dynamics, and the overall strategy of Breega. Separately, he noted that the firm understands the uniqueness of African markets and does not expect that it will support the same startups everywhere.
Melvyn Lubega says that Breega does not aim to invest only in the so-called Big Four countries, which include Nigeria, Egypt, Kenya, and South Africa. In this context, he noted that talents are distributed evenly. Based on the specified considerations, the company also directs financing to Guinea, Uganda, and other markets such as Francophone Africa. He also stated that Breega is committed to supporting and nurturing ecosystems through investments.
Melvyn Lubega says that in the context of the current investment reality, Africa accounts for 1% of venture capital. He noted that in the space of the mentioned circumstances, Breega has the task of coming to a place where others cannot come. He also stated that there are countries in Africa that do not receive venture capital at all, but at the same time are attractive. In this case, the potential as a functional ecosystem is implied.
Breega is making a long-term bet on Africa. In the context of discussing this goal setting, Melvyn Lubega stated that the company’s task as an investor is to stimulate the development of certain ecosystems. He noted that before the Wave, people didn’t talk about Senegal as much as they do now. In this context, Melvyn Lubega stated that an investor should not just follow the generally accepted practice of actions, but understand which direction of financing is the most promising. The investor’s task also involves using experience to move in a promising direction.
Ben Marrel also stated that the advantage of people starting businesses in small countries is that they already think globally at an early stage. According to him, Breega is interested in partnering with such entrepreneurs. At the same time, he noted that it is rare to build a large-scale business in a small country, which is why the strategy of activity is crucial in such regions. According to him, Breega enthusiastically supports founders in small African countries if they have an international expansion plan. He noted that this strategy has proved successful as a result of its use in Europe and is currently being applied in Africa.
Melvyn Lubega says that many companies operating only in Africa or in specific countries are paying more attention to their current portfolio firms, investing less in new businesses.
Tosin Faniro-Dada believes that the familiar names are still active in investing across various stages and markets. According to her, they appear to exercise more caution, especially regarding the entrepreneurs they choose to invest in. In this case, it implies a strategy of action compared to the concept of behavior that was widespread several years ago.
Recently, the business community and the expert environment have increasingly noted the prospects of Africa as a space of opportunities for the development of the fintech industry. In this context, a special factor is the fact that in many countries of the mainland, there is a lack of banking services for the population within the framework of the activities of traditional financial institutions. In the context of the relevant state of affairs, a request for financial services on digital platforms is being formed. This area of activity is very promising and is likely to bring significant profits to those fintech players who show interest in it.
As we have reported earlier, Norrsken22 Bets on Africa’s Fintech Boom.
