These are exciting times for growth-stage investing in Africa as Norrsken22, a pan-African venture capital firm, reaches the final close of its debut fund, raising a total of $205 million, exceeding its initial target. This also underlines the strong interest of institutional investors in supporting African startups at a vital stage of their journey.
Founded by five individuals with extensive experience in venture capital and private equity, Norrsken22 consists of founders Niklas Adalberth and Hans Otterling, together with managing partner Natalie Kolbe and general partners Ngetha Waithaka and Lexi Novitske. This venture capital firm, almost two years old, has operational teams in Nigeria, South Africa, Kenya and Ghana.
The partners launched the fund, called the Norrsken22 African Tech Growth Fund, in January last year after reaching its first close of $110 million. About 59% of the funding came from a consortium of 30 unicorn founders worldwide, including Flutterwave CEO Olugbenga Agboola, Skype co-founder Niklas Zennström, iZettle co-founder Jacob de Geer and Delivery Hero co-founder Niklas Östberg.
Norrsken22 began its fundraising at a time when there was a significant flow of capital into the technology sector. In addition to discussions with several development finance institutions (DFIs) and family offices, a prerequisite for raising a major fund in Africa, the company aimed to reach final close by the end of 2022. However, the global technology investment landscape has since seen a downturn, impacting fundraising efforts across the board, including from institutional investors. By 2022, venture capital activity in Africa was $5 billion to $6 billion. So far in 2023, this has shrunk to a range between $2.5 billion and $3.4 billion (based on data from The Big Deal and Briter Bridges), reflecting the decline in overall venture capital activity.
![Northern Lights22](https://techcrunch.com/wp-content/uploads/2022/01/norrsken22-team.jpg?w=680)
Norrsken22 general partners
The current slowdown in technology investments caused Norrsken22 to be delayed by a year in reaching its final close. Nevertheless, this achievement is notable given the challenges that many venture capital firms, both local and global, still face in raising or closing their funds. What’s even more impressive is that the growth fund was oversubscribed. Managing partner Kolbe attributes this success to renewed fundraising momentum in early 2023. Furthermore, Norrsken22’s founding team’s extensive experience in African investments, along with the support of other limited partners, mainly founders of the unicorn startups, played a key role . role in attracting interest and support for the fund, she noted.
Following the initial closure of the fund, which received support from the SEB Pension Foundation and several family offices, Norrsken22 attracted British International Investment (BII), International Finance Corporation (IFC), US International Development Finance Corporation (DFC), Standard Bank, and others and Norfund as new limited partners.
Investing in Series A and B rounds
International funds tend to spearhead most large deals in Africa, while local investors tend to focus on pre-seed to Series A rounds with smaller to medium-sized funds. Major Africa-focused funds such as Norrsken22 aim to bridge the gap between growth and late-stage investments. Approximately 50% of Norrsken’s capital will be allocated to building its portfolio of Series A and B companies; According to Kolbe, the rest will be reserved for follow-up investments, especially in the B and C rounds.
In a statement, the company said it is targeting “entrepreneurs developing fintech, edtech, medtech [health tech]and market-enabling solutions that will deliver strong returns and have a positive impact across Africa.” To date, the pan-African growth-stage fund has made five investments, including challenger bank TymeBank, B2B commerce retail platform Sabi, identity verification solution Smile Identity, car financing platform Autochek and informal merchant community financing app Shara.
“The kind of value we provide is for companies that want to grow beyond their borders and build pan-African businesses in multiple countries. Because we have three general partners in the beacon economies of sub-Saharan Africa: Nigeria, Kenya and South Africa, we were able to provide the companies with people on the ground and networks on the ground, and we also understand the nuances of growth and opportunity in the world . each of our markets,” Kolbe said of Norrsken22’s investment strategy. “These are also startups that are looking for an investor who can write a big check and who can follow subsequent rounds and anchor those rounds. That has become very important, especially now that liquidity on the continent is tightening.”
Norrsken22’s goal remains to invest in approximately 20 startups. The typical fund investment ticket size averages around $10 million. Still, the amount could reach $16 million, including follow-on rounds in select portfolio companies, as discussed by the partners in an earlier interview.
Thinking about exits
Like Norrsken22, several other growth-stage companies including Partech Africa, TLcom Capital, Algebra Ventures, Sawari Ventures and Novastar Ventures have raised one to two funds in recent years to address the capital shortage in Series A and beyond. . However, some of them have also invested in the pre-seed and Seed phase, an opportunity that Norrsken22 could explore if the right opportunity presents itself. “We have set aside a small amount for the opportunistic earliest phase. If something comes our way that looks exciting, we might put small amounts of capital into it, but that’s not where our focus is at all,” Kolbe said.
An important focus in the investment strategy of a growth stage fund is preparing portfolio companies for exits. According to the general partner, Norrsken22 is thoroughly evaluating potential exit scenarios, including identifying potential buyers for its portfolio companies and assessing the valuations they can offer at the end of the investment period. This due diligence is critical and the company has rejected investments where no compelling exit case was available, she added.
The managing partner said the firm is looking for exits for its portfolio companies through international strategic buyers and consolidation involving local industry leaders. Large multinational companies in Africa could also offer exit opportunities to startups. Some of these companies often struggle to innovate internally and may look to innovate by acquiring technology companies, which can be integrated into their operations or kept as separate entities under a different brand. Norrsken22’s debut fund is backed by an advisory board of business leaders in multinationals in banking, telecommunications, agriculture and real estate.