Lexi Novitske is currently general partner of African tech growth fund Norrsken22, based out of Lagos, Nigeria, but she is a bit of a veteran of the space, having also worked with Singularity Investments and Acuity Venture Partners over the last decade.
But Novitske told episode 17 of Disrupt Africa’s “The month in VC” podcast series, released in partnership with Atlantica Ventures and Goodwell Investments, that Africa wasn’t where she had thought she would end up.
“I had a pretty traditional finance career path. I was in the US, worked in investment banking for a while, then moved to a hedge fund, and I thought that would be the rest of my career. But I wanted to go have a bit of an adventure, take a sabbatical, to travel around the African continent. It was only supposed to be a couple of months, but it turned into almost a year of travelling,” she said.
“I fell in love with the continent personally, but also saw a real opportunity to build an investment platform. I really thought Africa, and especially Nigeria, was the largest untapped market in the world, and nobody was paying attention to it at that time. So I made a conscious effort to shift my career path and move out to Lagos.”
She originally moved to Nigeria to join a private equity firm, but started angel investing in what were the very earliest days of the tech ecosystem.
“The tech success stories at that time were the telcos and Interswitch, so nothing like this new generation of tech companies that are now household names. And that’s where I started investing. My first platform was Singularity Investments, and we transitioned that fund over to Acuity, and these were two early-stage funds,” Novitske said.
At this point, however, she noticed that the early-stage was actually relatively well serviced, and the real funding gap was at Series A and beyond, getting these companies from the early stages and being able to to really scale up and scale across the continent.
“As we were building out that thesis, the pieces really came together. Natalie Kolbe, who I had known for a long time, was chatting with both Hans Otterling and Niklas Adalberth, who ended up being the founders of our platform, as was I. Hans and Niklas brought us together to set up Norrsken22. So that was the very start of it, and we brought in Ngetha Waithaka also in Kenya.”
Norrsken22 came from the Norssken Foundation, based in Sweden but active in Rwanda – and Africa more widely – for the last few years. They wanted to create the next-gen of multi-billion dollar companies across the continent.
“They had come from another small ecosystem, the Nordics, where they had seen all these pieces come together a couple of decades before. A couple of companies starting concentrated tech centres in urban metro areas; angel capital being able to spur these ideas; and really high quality talent that was able to build very successful tech companies, not only for the Nordics and Europe, but for all over the world,” said Novitske. “And like every market in the world they really believed that Africa would follow the same trajectory.”
The Norssken Foundation seeded the fund, and also connected it with many successful entrepreneurs to invest in the fund and become part of its unicorn board.
“This is a group of unicorn tech founders who have themselves been through all of the growing pains from growing massive businesses, and are able to leverage their learnings, their network, their expertise across our entire portfolio, when our portfolio companies are facing the same kind of challenges,” said Novitske.
The fund had a first close in 2022, and since then it has invested in 10 companies, focused mainly on Series A through C.
“We’re really looking to find those companies that are at the start of their J-curve of growth, and are looking to expand, oftentimes across multiple markets in Africa and sometimes into other markets in the world,” said Novitske. “And we catalyse that growth, what they’ve already built out and proven with their existing customer base, with our capital. We are also able to provide strategic guidance and on-the-ground expertise in-market.”
She says Norrsken22 has had great success across its portfolio to date, with a standout being Nigerian B2B e-commerce company Sabi, while she also cites Tanzania’s NALA, a P2P remittances company.
“Our focus is quite flexible as the market matures, but there are a couple of verticals that we have focused on. One is the payments space, where I would argue we are at the first evolution, and it is still quite broken. We’ve been executing deals across the P2P transfer space, B2B transfers, and the CFO stack. But we’re also very excited about the cross-border transaction space,” Novitske said.
“We’ve also been doing quite a few investments within supply chain. I think this is a space that is very inefficient and leaves a lot of room for capturing high margin, but also has a massive impact on the efficiency of trade across the continent.”
Aside from fintech and market enablement, which she says are the fund’s “two main buckets”, Norrsken22 is looking for opportunities in ed-tech and e-health.
“These are still quite nascent sectors in Africa, so we have struggled to find deals, but they are verticals that we think will start maturing over the next few years, and we may do some earlier-stage deals within them.”
Norssken22 invests across the entire continent, but mainly focuses on urban centres that have evolved as tech hubs, like Cairo, Lagos, Nairobi, Cape Town, and Johannesburg, and it is looking for opportunities between Series A and C, with a little flexibility. Novitske says the company is strongly focused on value creation when it comes to its investments.
“We oftentimes take board seats, but even in cases where we don’t we work alongside the founders in driving strategy. The fact that we have senior decision makers across all of the key hubs across the continent lends itself well to expansion opportunities for our portfolio companies. We are able to engage with regulators on the ground, source talent through our networks, help with business development, licensing, and all of that,” she said.
“Additionally, we have certainly been through various stages of exits, whether that’s M&A or listing, in the case of, for example, Fawry, which one of our partners took public in Egypt. So we are thinking about that from the point at which we invest, and helping our companies become more professionalised so they move towards an exit.”
Novitske said it is clear that international investors have been pulling away from Africa for the last couple of years, sparking the current capital shortage. This is the same phenomenon witnessed in other markets, just delayed, and Africa is also seeing a lag on the return.
“Some of those markets are starting to see deals getting done, first the US and then other emerging markets. Africa’s been a bit slower to pick up that momentum, but we are seeing it for the very healthy companies, that despite the economic headwinds are seeing strong growth numbers, and are nearing or at profitability. For those sorts of companies we are seeing interest from global investors,” she said.
“And those rounds are still quite competitive. Pricing and valuation is much higher for those high quality ventures.”
Novitske believes the market is becoming more reasonable, and consolidated, and she remains extremely bullish on the future of the tech space on the continent.
“I’m investing in Africa because I think it is the most exciting market in the world, and I think we’re only at day one. I think the future of the world will be in Africa – the median age is 25, China for example is 39. And if we look at this picture in a couple of years time it is going to be even more dramatic,” she said. “It is a great investment opportunity and a fantastic opportunity to make life better for the billions of people calling Africa home.”
Norrsken22 got off to a relatively slow start investing-wise, she says, because it was waiting for some pricing adjustments, and also concerned about economic headwinds in some of its major markets, but it is now quickly catching up.
“We’ve been extremely active, and I think for the rest of the year you’ll see another three-to-five deals coming from us. Some of these will be quite large ticket items, but we also want to retain a bit of flexibility in terms of securing some early-stage opportunities that we really believe in.”
