Pan African VC Microtraction has raised $15 million in the first close of its second fund, Microtraction Community Limited.
A $15 million first close of Microtraction’s second fund has been announced by Microtraction, an early-stage venture capital firm that invests in African internet entrepreneurs at the pre-seed stage. The market slump and anticipated slowdown in foreign investment into early-stage African startups are factors in this.
Founded by Yele Bademosi and Kwamena Afful in 2017, with initial backing from PAVE Investments, Michael Seibel, Andy Volk, and Chris Shultz, they have invested in 36 companies comprising 83 founders across two funds in Nigeria, Ghana, Kenya, and Rwanda.
These companies in sectors like fintech, health-tech, SaaS, edtech, crypto, gaming, and mobility have raised a total of $100m+ in follow-on funding, currently valued at $760m+ combined, and have created 900+ jobs. Since their pre-seed stage, some of the companies we have backed include 54gene, Cowrywise, Helicarrier, Lemonade Finance, Bitsika, and Raise.
“This year marks the 5th anniversary of Microtraction, and over the past few years, we’ve been fortunate enough to witness and contribute to the growth of the African tech ecosystem. We are grateful to have partnered with some of the most innovative, mission-driven founders solving some of the continent’s most pressing challenges,” Kwamena Afful, Founding Partner at Microtraction.
Their strategy had to be spot on to be the most accessible and preferred source of pre-seed funding for African tech entrepreneurs. This strategy included having an open application format that allowed anyone to apply for funding, clear investment criteria that helped identify the best early-stage growth-driven technology businesses, a seamless investment process, a hands-on working relationship that supported and guided the founders on their journey, and access to a broader network that provided specific service needs to the startups.
They have consistently invested in founders on the continent and will continue to do so despite the market conditions. Their debut fund has backed 19 companies in 4 countries over three years. Of the 19 companies, 14 got into global accelerators, ten are valued at $10 million, 37% have female co-founders, and 18 have raised follow-on funding. These companies have a combined valuation of $540m+.
Five years ago, the aim was to bridge the pre-seed funding gap and be the first check investor for the best African startups. Fast forward to 2022, more African funds have emerged for pre-seed startups, African founders are backing other African founders very early, and the African tech ecosystem has gotten more attention from global investors.
“As a team, we constantly ask ourselves: ‘What do founders need right now? How do we improve our offering to founders? How do we differentiate ourselves from other investors?’. We realized, very quickly, that the difference between founders on the right track to building successful businesses and those not quite yet is access to a rich and valuable community that increases the odds of success,” Dayo Koleowo, Partner at Microtraction.
To create this community for the best African founders, our team carefully and intentionally sought out founders, GPs, and LPs that will make up the members of our growing community focused on supporting and championing the next set of African founders building for the continent.
The LPs in this community fund include 30+ Venture-backed founders of African companies like
Helicarrier’s Ire Aderinokun, Paystack’s Shola Akinlade, Cowrywise’s Razaq Ahmed, 54gene’s Francis Osifo, Piggyvest’s Odun Eweniyi, Paga’s Jay Alabraba, Spleet’s Tola Adesanmi, Float’s Jesse Ghansah, etc.; GPs of VC funds like Ribbit Capital’s Micky Malka, Hustle Fund’s Elizabeth Yin, Sebastes Capital’s Jason Fish, a16z’s David Haber, Y Combinator’s Michael Seibel, 776’s Alexis Ohanian, Bonow Ventures’ Tilo Bonow, Precursor Ventures’ Charles Hudson, Better Tomorrow Ventures’ Sheel Mohnot, Broadhaven Ventures’ Michael Sidgmore, etc.; Web2 and Web3 Operators; Local and International HNIs; Sport and Entertainment Icons; and PAVE Investments (the anchor LP in MT Fund I), which has committed $1.5m into the community fund.
Microtraction Community Limited (the new fund’s entity name) will write first checks of $100k for 7% into early-stage African companies across different sectors and regions in Africa with an option for a quick top-up of up to $350k, as long as we are not more than 25% of the company’s next official fundraising round. Through this second fund, we intend to make a minimum of ~60 first check investments into African startups, and up to ~20% of those investments will get the quick top-up in their next round. So far, 20 investments have been made through this community fund.
To create an engaging experience within the community, we are venturing into the Web3 space by setting up a community vehicle (akin to a DAO) as the first African fund with community tokens for its members, where social tokens will be used to incentivize and gamify the experience of members who will provide value-add and support to the fund & founders. The DAO will now operate on an invite-only basis and launch with various perks such as exclusive access to events, investment opportunities, industry deep dives, and more.
“As a group, we are never shy of experimenting and creating a blueprint others can build upon. We believe that the African start-up ecosystem is still in its infancy and will take a community of connected, aligned, and incentivized members to contribute, grow and accelerate its development. As a fund & community, we look forward to continuing to innovate on Africa’s innovation infrastructure alongside our members,” Yele Bademosi, Founding Partner at Microtraction.
Accelerating Africa’s transformation to a sustainable and developed economy is Microtraction’s long-term goal. To achieve this, they fund entrepreneurs who use innovation, cash, and technology to address some of the continent’s most pressing problems. We should discuss if you are trying to solve one of these issues.