VC firm based in Paris Breeg has observed the maturation of the African tech ecosystem over the years. From receiving lower than $1 billion a yr in enterprise capital to a record high of $6 billion, there has also been an increase in the variety of high-growth corporations, from one unicorn to seven in three years.
Now the VC wants to put some of his own money behind what he sees, with a $75 million fund to invest in early-stage startups in Africa. The company revealed to TechCrunch that it is a secured commitment of roughly 70% of the capital at first close.
Since entering the VC scene in 2015, Breega has fully raised 4 funds: a first seed fund (€45 million), a second seed fund (€110 million), a first enterprise fund (€106 million) and a second enterprise fund ( 250 million euros). In lower than a decade, the French investor, with a portfolio of over 100 startups in 15 countries, achieved assets under management value $700 million.
The Africa Seed I fund is Breega’s sixth fund (including the third European seed fund the company is currently raising) in nine years, but its first with a mandate outside Europe. Its launch coincides with the opening of two recent offices in Lagos and Cape Town, key centers of the African tech ecosystem. These offices join Breega’s existing locations in Paris, London and Barcelona, strengthening its presence in the EMEA region.
Breega prides itself on being a founders’ fund for founders, investing from seed to Series A. “Our DNA is to support founders where innovation thrives and opportunity abounds. We offer them our operational expertise because everyone on our team has been on the other side as founders or operators,” said the co-founder and CEO Ben Marrel in an interview with TechCrunch.
Marrel notes that this approach, combined with a dedicated scaling and portfolio support team, has made Breega one of the fastest growing VC funds in Europe. The intention is to repeat this success in Africa.
Therefore, the launch of the fund for start-ups at an early stage of development resulted from the desire to benefit from the opportunities offered by the continent. What higher way to do this than by having local partners who understand market dynamics and can make informed investment decisions? Larger corporations operating in Africa and with European roots, equivalent to Partech and Norrsken22, follow a similar strategy.
Melvyn Lubegi AND Although Faniro-Dada they lead the Breega Fund for Africa, which has received support from institutions equivalent to Bpifrance and the Dutch business development bank FMO. Both partners bring a long time of entrepreneurial and operational experience to the table; prior to joining Breega, Lubega co-founded edtech unicorn Go1 and Faniro-Dada was CEO of Endeavor Nigeria.
Breega plans to invest between $100,000 and $2 million in startups in the Big Four African markets – Nigeria, Egypt, South Africa and Kenya – in addition to French-speaking African markets including Morocco, Senegal, Côte d’Ivoire, Cameroon and DRC. The Africa-focused VC firm has already backed nine startups, including Numida, Hohm Energy, Socium, Klasha, Kwara, Coachbit and Sava, and goals to make at least 40 investments from this first fund.
In an interview with TechCrunch, the partners discussed Breegi’s interest in Africa, the company’s investment strategies, local market dynamics and the potential of untapped markets on the continent. The interview has been edited for brevity.
TC: Seventy-five million dollars is a significant first fund in any market, especially in Africa. If I understand accurately, the fund is intended for pre-seed and seed startups. But beyond money, what value does the company provide that founders may not find in other corporations?
Melvyn: All partners and investment team members at Breega are former founders and operators. We know firsthand what it’s like to raise capital, build businesses, face failure and survive difficult times. Reflecting on my experience, I had difficulty finding African investors who had built corporations without raising money. Therefore, our goal is to be the investor we wished for when building our businesses. Many entrepreneurs appreciate having a sparring partner who has been there and done it before. We want to be the first to check start-ups, coming out of quite strong and leading rounds in the pre-seed and seed phases.
More than a quarter of our team is dedicated exclusively to supporting our portfolio corporations in various areas equivalent to go-to-market strategy, talent management, governance, brand and communications. This commitment allows us to offer greater than just capital; we offer our entrepreneurs with experienced sparring partners who bring international exposure and ecosystem knowledge. We consider this is necessary not only for our entrepreneurs, but also allows us to achieve above-average results based on our European experience.
What sectors is Breega interested in in Africa? And why?
Actually: We focus on industries that may have a transformative impact on meeting current and future challenges across the continent, especially with expected population growth, equivalent to fintech, healthtech, proptech, logistics and edtech.
Melvyn: Additionally, you’ll be able to think of it as a Venn diagram: we focus on areas that have the best impact, align with the Sustainable Development Goals (SDGs) and where Breega has extensive experience from supporting over 100 corporations. What’s particularly useful is that lessons learned from successes in Europe and the US inform our approach in Africa, helping us discover where necessary opportunities align with our expertise.
I’m glad you brought this up because I’m curious how Breega strikes a balance and avoids the trap of supporting US- and European-style corporations in Africa.
Actually: It comes down to having local partners who understand the challenges faced by different markets. With my extensive experience in Nigeria and Melvin’s in South Africa, our attitude stays unchanged. We do not invest in corporations because they resemble their American or European counterparts. We focus on solutions that solve unique challenges specific to Africa and its diverse markets. While there are some similarities, we intentionally support solutions tailored to local needs.
One of the benefits of Breega is the experience of our European team. They help us understand that Africa is perhaps where Europe was a few a long time ago. They have witnessed this evolution, and we are already following a similar path. This perspective helps us recognize that this is a journey and an evolution, while being aware of the current state of the market and the solutions needed today.
Ben: I think what Tosin said is extremely necessary. I spend a lot of time with our team in Africa, so it is not like we just put a team and a fund there that operates independently of our core operations. No, it is fully integrated into our culture, team dynamics and overall company strategy. We understand that these markets are unique and we do not expect to support the same style of company all over the place. We are very aware of this and use our knowledge of what has worked for us and what has not.
What is Breega’s approach to investing in certain markets compared to others in Africa?
Melvyn: We don’t need to invest only in the Big Four countries (Nigeria, South Africa, Egypt and Kenya) because we understand that talent is evenly distributed. That’s why we invest in Uganda, Guinea and other markets, e.g. Francophone Africa, which is particularly necessary due to our strong roots in these regions. In addition, through our investments, we are committed to supporting and nurturing ecosystems. As a pan-African fund, we must take this broad approach.
Today, VCs want to be more pan-African and invest in largely untapped markets, and you suspect this approach is essential to finding the next wave. But such wins are rare, so in the largest markets with greater potential for VC-scale businesses, why prioritize broader scope over specificity?
Melvyn: The reality is that Africa gets 1% of enterprise capital and we have 18% of the population. So from that perspective, our role as Breegi, as a top-tier European and African investor, is also about having the ability to go where others truthfully cannot go because we consider that value could be created there.
If you think about the ecosystems that we serve, there are regions that do not receive enterprise capital but are still very attractive. Moreover, as we focus on long-term investments on the continent, we deliberately say that our role as investors is also to catalyze certain ecosystems.
And yes, as you say, people didn’t talk much about Senegal before Wave, and an investor needs to understand, beyond just following the herd, what fundamentally good early-stage investments appear to be. and having the ability to use that have to go there.
Would you say this model has worked for Breega after almost a decade of investing in Europe?
Ben: I think so. The advantage of individuals starting a business in smaller countries is that they typically start considering globally from day one. And it is these founders that we are considering about now.
The key query is not about talent itself, but about the market that the company’s founders are entering. Building a large-scale business in a small country is rare, so a multi-country strategy is key. We enthusiastically support founders in smaller African countries, provided they have a plan for international expansion. This approach has proven successful for us in Europe and we are using the same strategy in Africa.
I’d like to know where you think the African VC scene is currently in terms of co-investment opportunities.
Melvyn: Many African-only or country-specific investors are targeting their existing portfolio corporations while also making smaller investments in recent businesses. Likewise, many of them have no capital to draw on. When you see subsequent rounds and a series of extension rounds, you see that many of the smaller funds are struggling to participate meaningfully. I think it is also a matter of time.
Actually: I consider that famous names are still lively in investing in various stages and markets. However, they appear to be more cautious now compared to a few years ago, especially regarding the entrepreneurs in which they select to invest.