Having worked on Wall Street for a decade doing M&A for Lehman Brothers and Barclays, Zachariah George first landed in South Africa to watch some football matches during the 2010 World Cup. But having spotted a major gap in the market, he never left, and 14 years later is an active angel investor and heading up Launch Africa Ventures, the continent’s most active VC firm.
“I realised that there was almost no tech ecosystem in the country, well, on the continent really,” George told the latest episode of “The month in VC”, Disrupt Podcast’s regular deep-dive into all things African venture capital.
So George got busy. Actively angel investing, he built the Tech Lab Africa accelerator in partnership with Barclays, which was eventually sold to Techstars before George and Philip Kiracofe brought Startupbootcamp, one of the biggest accelerators for B2B and B2B2C startups in Europe, to Africa.
“We ran Startupbootcamp AfriTech for four years until 2019. We had an incredible three cohorts, with some really big names like Kuda, Yobante Express, and Curacel part of that,” George said.
It was during this time that he realised that there was a big lack of funding post-accelerator, at the pre-Series A stage, for African tech ventures. Alongside Janade du Plessis, head of venture capital at Nedbank, one of Startupbootcamp’s banking partners, George decided to build a fund that invested in the best companies coming out of accelerators on the continent.
Launch Africa Ventures was born. The fund launched operations in 2020, headquartered out of Mauritius, and raised an oversubscribed US$36 million within 18 months, with investments from 238 retail and institutional investors in 40 countries. Interestingly, it did not include one DFI, which is quite uncommon.
“We took a lot of smart capital from former founders all across the world, lots of industrial family offices, Commerce Ventures in Germany was one of our biggest LPs. So it was small checks, but from lots of smart people and families across the world,” said George.
“We made a concerted effort to deploy capital into truly pan-African ventures, so not just focused on Nigeria, Kenya, South Africa and Egypt, but also second and third tier markets like Cameroon, the DRC, Tunisia, Morocco, Uganda, et cetera,” George said.
Launch Africa focuses primarily on B2B SaaS companies, and looks to add lots of value post-investment, to help startups avoid the so-called “Valley of Death” between pre-seed and Series A.
“Our dollar would have at least another dollar of non-financial value ads, through media access, through co-investments, through digital talent hiring, cross-border expansion, and a lot of other things,” George said.
“So founders wouldn’t spend years just raising capital. We’re also one of the few funds that allow our LPs to go invest with us. So in addition to the US$31 million dollars that we deployed in Fund I, we had more than half of that, US$17 million, co-invested by our LPs. A lot of our LPs sit on the advisory boards of our portfolio companies. So you suddenly saw this blended strategic value coming in as early as seed and pre-series A, which is something a lot of African founders were not used to.”
Four years later, Launch Africa is the most active VC investor on the continent by quite some way. Fund one had 133 startups, and Launch Africa has now started deploying from its second fund, which it plans to close next year. Disrupt Africa reported last week on how the firm’s investment strategies have been tweaked slightly for Fund II, but Launch Africa remains primarily focused on B2B and B2B2B models across a variety of sectors.
In addition to all the activity at Launch Africa, George remains an active angel investor, though his activity there has had to change a little in scope as well.
“I was one of the first angel investors in Flutterwave. I was a small angel in Yoco, in Mono and Brass, and a few other companies,” he said.
“I’m not as active as I was about four or five years ago, simply because as GPs you’ve got to put in one per cent of your fund’s AUM from your own funds. So I’m not as liquid as I was four or five years ago.”
What angel investments he does make today, he has to clear with the fund.
“I typically invest at the pre-seed stage, so a lot of my angel tickets right now are in pre-revenue companies or maybe companies that are doing US$10,000 or less in monthly recurring revenue,” George said. “Launch Africa as a fund strictly invests in companies that are post-revenue and preferably at least US$25,000 in monthly recurring revenue. So there’s a clear Chinese wall from a stage perspective in where I invest versus where the fund invests.”
His focus is clearly on Launch Africa, however. Given the timing of its formation, with COVID followed by the growing valuations bubble, the firm has had to tread carefully. But George said it still has big plans for its second fund, even if the strategy is slightly different and the wider context has changed.
