Novastar Ventures closes $72.5m fund, expands to West Africa

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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.

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Passionate about the vibrant tech startups scene in Africa, Tom can usually be found sniffing out the continent's most exciting new companies and entrepreneurs, funding rounds and any other developments within the growing ecosystem.

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