Fund managers across Africa are rolling out innovative strategies to support local small businesses and startup founders. It’s not unusual for them to take three years or more to reach a first close.
Ireland-based Small Foundation is working to support Africa’s ecosystem of emerging fund managers with a $2.5 million long-term working capital facility to cover operational expenses for new funds raising less than $20 million. Its first check from the six-month-old initiative has gone to Kenya-based FrontEnd Ventures, an early-stage venture fund that bets on local Kenyan founders.
FrontEnd Ventures is looking to raise $8.5 million for its first fund. It has already made 10 investments, including BuuPass, which helps commuters plan, book and pay for public transit rides. Power is a fintech venture offering workers access to their earned wages and financial planning and savings tools. Mawu is an online marketplace for handmade jewelry, clothing and crafts.
FrontEnd “exemplifies the kind of fund we set out to support with our GP Working Capital Facility,” Small Foundation’s Karina Wong said in a statement. “Locally led and ecosystem-focused, they’re not just deploying capital – they’re actively reshaping Kenya’s venture landscape to unlock local capital.”
Emerging managers
In addition to Small Foundation’s Working Capital Facility, the foundation is backing a working capital facility for funds over $20 million and a deal warehousing facility for first-time female fund managers. It supports the African fund manager network, the Collaborative for Frontier Finance, and is a member of the Growth Firms Alliance, a philanthropic network focused on bolstering resources available to emerging market small businesses.
Small also recently joined the Catalytic Capital Consortium to “elevate African voices, build local investment capacity, and increase the volume of catalytic capital flowing to African intermediaries and entrepreneurs.”
There’s a small but growing movement to mobilize capital and resources for new fund managers and investment vehicles. In the US, Mission Driven Finance last year rolled out its Capital Partners group to help emerging managers with bridge financing, working capital advances, deal warehousing and capital for co-investments. Last week it launched a capital call line of credit to help managers close deals.
