The Nairobi-based Novastar Ventures has held a first close of its second venture fund, securing US$72.5 million in commitments from existing investors such as the AXA Impact Fund II, CDC Group, European Investment Bank, Dutch Good Growth Fund and FMO.
Novastar is a venture capital fund manager that backs early and growth stage businesses led by entrepreneurs with the capability and ambition to transform markets and sectors.
Its first fund was a US$80 million pot alongside a US$10 million co-investment facility, and backed 15 companies, including PayGo Energy, Lynk, Penda Health and Soko. While Fund I continues to invest follow-on capital into the successful businesses in its portfolio, Novastar II targets new breakthrough businesses in East and Anglophone West Africa.
With a target size of US$120 million, the second fund expands Novastar’s venture model to cover both East and West Africa, adding a presence in Lagos to the one in Nairobi.
“Our vision is to see Sub-Saharan Africa populated with a growing number of high-capacity entrepreneurs building innovative businesses that serve the common good. We aim to demonstrate that commercial venture investing can generate both large-scale social benefits for the mass market and attractive financial returns for investors, thereby unlocking more capital to fuel entrepreneurship in the region,” said Novastar co-founder and managing partner Steve Beck.
The fund can invest as little as US$250,000 in an unproven business model addressing a big problem in a big market. Following initial small funding rounds, Novastar can then fund the rapid growth stage of portfolio companies with more than US$6 million through multiple capital rounds.
Explaining the expansion to Lagos, Novastar co-founder and managing partner Andrew Carruthers said the company had seen how flexible long-term capital, coupled with local knowledge and innovative business models, had catalysed rapid growth in some truly exceptional enterprises in East Africa, thereby attracting substantial investment from a new category of investors.
“By establishing a presence in Lagos, with its concentration of talented entrepreneurs addressing a vast market, we want to be the spark to a similar cohort of innovative businesses generating social and economic value for the mass market, attracting substantial investment into West Africa as well,” he said.