African startup founders can finally start looking for big-ticket funding nearer home

For startups founders in Africa, finding the capital to fund their vision is difficult. But, more than ever before, there are reasons to believe that’s starting to change.

On Tuesday (Oct. 10), Andela, a pan-African startup that trains and pairs coders with global companies, revealed a new $40 million Series C round.

There were a few things of note about the round. Firstly, in the early days of African tech ecosystems, few startups make it to a major Series C round of funding. Then, the amount of $40 million was notable for its size.

But perhaps most significantly, the round was led by CRE Venture Capital, an African venture capital fund, with participation from TLcom Capital (whose Africa-focused fund is led by a former Nigeria ICT minister), DBL Partners, Amplo and Salesforce Ventures.

CRE has invested in previous Andela rounds but says this is the largest ever round led by an African venture capital firm. Andela’s existing investors including Chan Zuckerberg Initiative, which led a $24 million Series B round, GV and Spark Capital also participated.

With the new funding, Andela, which was launched in 2014, plans to push its expansions plans (it opened in Uganda, its third African country, in May) and double its 500-strong developer pool.

For the local ecosystem, Pule Taukobong, founding partner at CRE, says this investment “sets the precedent” that an African venture fund can lead large multi-million dollar rounds. The landmark shows the “increasing capacity” among African venture funds to back local entrepreneurs, says former Nigeria ICT minister Omobola Johnson and senior partner at TLcom Capital.

The message here is that founders can now start to look to African funds for big-ticket funding rather than rely on Silicon Valley or European funds, as they have typically had to do. Taukobong says CRE currently has 30 investments across eight African countries while Johnson says TLcom hopes to announce another investment before the end of the year.

The hope here is Africa-focused funds led by Africans can attract and support founders better because of their familiarity with the local markets in which these startups operate . For founders, pitching to Silicon Valley-based investors who don’t understand the nuances of local African markets often proves tricky. As such, Johnson says founders invariably stand to gain by partnering with “people who understand the context of the space they’re playing in.” Johnson certainly understands the local ecosystem better than most across the Atlantic having served as minister from 2011 to 2015—when much of foundations for the Lagos tech ecosystem, now Africa’s most valuable, was laid.

Andela’s large raise is also likely to resonate with local founders. OO Nwoye, co-founder of Callbase, a startup that allows businesses set up digital call centers, says the investment shows what’s “practically possible” for local founders. Yele Badamosi, managing partner at Microtraction, a newly launched early-stage investment fund, shares similar sentiments. “It’s important to know that companies in the ecosystem have the potential to scale and create value,” he says. In that regard, “Andela is like the poster-child of what can be possible,” Badamosi says.

But even though access to capital might have widened, local founders can improve their chances of bagging funding if they have a better understanding of the investment landscape, says Taukobong. “Entrepreneurs need to understand who they should be speaking to at what point of the business they are in,” he tells Quartz. For example, a business which hasn’t quite cracked a viable product should be focused on winning backing from angel investors rather than pitching to venture capital funds, he says.

However, gaps still exist in the investment chain. Tech incubators and accelerators like Co-Creation Hub and Ventures Platform serve as major sources of early-stage funding in Nigeria. But beyond that stage, founders often find it difficult to raise Series A rounds locally. However, Johnson says TLcom is looking to fill that gap. “The biggest disaster,” she says, is when companies that are fortunate to get seed funding go on to do well but aren’t able to raise Series A funding.

Ultimately, with more African funds investing in local companies, a fundamental problem is being solved. “We want to see the ecosystem flourish,” Taukobong says. “[Local] entrepreneurs are solving big problems and what better way to support them than to capitalize them?”

This post first appeared HERE

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