TLcom Capital closes second fund for $154 million to support early-stage startups across Africa

Image credits: TLcom Capital

Venture capital activity in Africa has shown resilience over the past six months, with major firms backing African startups closing funds despite an ongoing funding winter.

In the latest development, African venture capital firm TLcom Capital, which has offices in Lagos and Nairobi and focuses on early-stage startups, has announced its second fund, TIDE Africa Fund II, totaling $154 million. Completed financing. The final transaction makes the company the largest seed and Series A investor in Africa.

The oversubscribed fund, originally targeted to close at $150 million, attracted participation from more than 20 limited partners. Notable investors include the European Investment Bank (EIB), the Visa Foundation, Bertelsmann, and his AfricaGrow, a joint venture between Allianz and his DEG Impact.

This news comes two years and months after TLcom Capital announced the first close of its second fund at $70 million, matching the size of its first fund, TIDE Africa Fund I. Even with longer funding periods, VC firms can count some positives. Managing Partner Maurizio Caio told TechCrunch in an interview.

Notably, TLcom Capital closed its second fund in a shorter period of time than its predecessor, even though it was twice the size. Caio attributes this success to an improved understanding and acceptance among limited partners of venture capital in Africa as a legitimate asset class. Additionally, the company’s portfolio of companies that embody its investment strategy played a vital role in gaining investor trust and support.

Unlike many VC firms that move from supporting pre-seed and seed stage startups to later stage investments with subsequent funds, TLcom Capital maintains a consistent strategy. The London-based firm continues to prioritize early-stage opportunities, particularly at the seed and Series A stages, while also considering opportunistic deals in the growth and later stages. For example, this investor backed 10 out of 11 companies in their first fund’s seed or Series A. However, at a later stage it put money into subsequent rounds across both funds (a Series C investment in Andela, a unicorn provider), a global job placement company for software developers, and a Nigerian digital bank, His Series B round at FairMoney).

“We start early when entrepreneurs are raising a seed or Series A, stay with them along the way, and invest when we think the company is worth putting more capital into.” I prefer to continue to do so,” Caio said. “The reason for this is that we are building a portfolio that supports 20 to 25 companies that can individually return funds ‘if all goes well’.”

The managing partner emphasizes that when TLcom evaluates early-stage opportunities, it assesses the potential for portfolio companies to generate returns of 10-20x. The approach, he said, is to ensure that successful companies cover their losses and enable companies to achieve a three to four times return on a total basis.

One way the company improves its risk in this regard is by supporting repeat founders. Sim Shagai (uLesson and Konga), Etop Ikpe (Autochek and Cars45), and Grant Brooke (Shara and Twiga) are some examples. Despite not having the desired success in their past ventures, Caio says these founders gained valuable insight to avoid repeating past mistakes in new ventures. “When things happen, Don’t let things go to plan. It is important to act quickly, pivot and move on to the next venture, knowing that the lessons learned will pave the way for future success,” he said.

The other is to invest early in the deal, at the pre-seed stage. In 2020, TLcom Capital invested in Autochek and Okra at the pre-seed stage and has followed up since then. In subsequent rounds. Two years later, the company launched a pre-seed strategy. The $5 million will be paid in check size and will take a low-touch approach to building a pipeline to key seed and Series A strategies (skilling platform Talstack is the first recipient). Part of the fund, $2 million, was earmarked for co-investing in women-led startups through FirstCheck Africa, a women-focused pre-seed fund. The firm says its commitment to gender balance is evident in its partnership and investment committee, which is majority female, and three out of five partners are women.

TLcom Capital, which focuses on traditional sectors such as fintech, mobility, agriculture, healthcare, education and commerce, has already backed six companies from the new fund, with amounts ranging from $1 million to $3 million. has made an initial investment. These include SeamlessHR, FairMoney, Zone, and Vendease. Additionally, the company expanded its portfolio to include ILLA, a middle-mile logistics platform, and Littlefish, which enables payments and banking products for small and medium-sized businesses, with its first investments in Egypt and South Africa, respectively.

“For us, it was important to add Egypt and South Africa as destinations for our capital, as the Big Four continues to produce the most valuable companies,” said Caio, adding that TLcom’s portfolio to date pointed out that it was a start-up primarily based in Nigeria, but Kenya is a country where the company has since expanded its operational capabilities and expertise.

Multi-sector focused firm and prominent venture capital firms such as Norsken22, Al Mada, Novastar’s Africa People + Planet, and Partec Africa raise significant funding to support African startups from pre-seed to Series C are doing. As they unfold across different stages of startup growth, these outcomes play a critical role in driving growth across Africa’s tech ecosystem, and therefore the exit opportunities they facilitate and the tangible benefits they bring to LPs. The focus will be on the benefits.

“In Africa, it’s not just about how much money comes in, it’s about the profits,” Caio emphasizes. “We need global capital to look at Africa and think about where good investments can be made and where technology can create a lot of value. We are still a long way from achieving that at scale. So that’s our main goal.”