With Norrsken22, a pan-African venture capital firm, reaching the final closure of its maiden fund and raising a total of $205 million, exceeding its initial objective, it’s an exciting time for growth-stage investing in Africa. This further demonstrates institutional investors’ strong interest in helping African businesses during a critical stage of development.
Five individuals with a wealth of venture capital and private equity expertise founded Norrsken22: general partners Ngetha Waithaka and Lexi Novitske, managing partner Natalie Kolbe, and founding partners Niklas Adalberth and Hans Otterling. This nearly two-year-old venture capital business has operating teams in Ghana, South Africa, Kenya, and Nigeria.
After completing the first close at $110 million, the partners launched the fund in January last year under the Norrsken 22 African Tech Growth Fund. Thirty unicorn entrepreneurs worldwide contributed around 59% of the capital. These founders included Olugbenga Agboola, CEO of Flutterwave; Niklas Zennström, co-founder of Skype; Jacob de Geer, co-founder of iZettle; and Niklas Östberg, co-founder of Delivery Hero.
Fundraising for Norrsken22 started during a period of notable financial inflow into the technology industry. The company sought to complete the final closure by the end of 2022 in addition to having conversations with several family offices and development finance institutions (DFIs), which is a need for raising a sizable fund in Africa. Since then, though, there has been a downturn in the global digital investment scene, which has affected all forms of fundraising, including that from institutional investors. The venture capital invested in Africa in 2022 was between $5 and $6 billion. According to statistics from The Big Deal and Briter Bridges, it has decreased from $2.5 billion to $3.4 billion thus far in 2023, keeping with the general downturn in venture capital activity.
The present downturn in technology investments resulted in a one-year postponement of Norrsken 22’s ultimate closure. Nevertheless, given the difficulties several VC firms—both domestic and international—continue to face in obtaining capital or concluding deals, this achievement is remarkable. The fact that the expansion fund was oversubscribed makes this even more impressive. Kolbe, the managing partner, credits the accomplishment to a resurgence of fundraising activity that began in early 2023. She said that the fund’s success was mainly due to the backing of other limited partners, primarily the founders of unicorn firms and the founding team of Norrsken22’s vast expertise in making investments in Africa.
Following the fund’s original close, which was aided by the SEB Pension Foundation and a few family offices, new limited partners for Norrsken22 included Standard Bank, British International Investment (BII), International Finance Corporation (IFC), U.S. International Development Finance Corporation (DFC), and Norfund.
International funds typically lead large deals in Africa, with local investors concentrating mainly on pre-seed to Series A rounds with more modest to medium-sized funds. Big Africa-focused funds such as Norrsken22 seek to close the gap between growth and late-stage capital. According to Kolbe, around half of Norrsken’s funding will go toward helping its portfolio grow through Series A and B firms. The remaining portion will be set aside for follow-on investments, mainly in the B and C rounds.
“Entrepreneurs developing fintech, edtech, medtech [health tech], and market-enabling solutions that will deliver strong returns and have a positive impact across Africa” is the firm’s stated emphasis. The challenger bank TymeBank, the B2B commerce retail platform Sabi, the identity verification service Smile Identity, the auto financing platform Autochek, and the finance app for informal merchant communities Shara are among the five investments made thus far by the Pan-African growth-stage fund.
“We provide value to firms that want to expand internationally and establish multinational, Pan-African enterprises. “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 each of our markets,” Kolbe said regarding Norrsken’s investment strategy. “We have three general partners in the beacon economies of sub-Saharan Africa: Nigeria, Kenya, and South Africa.” Additionally, these businesses seek a significant investor who can lead and support them in subsequent stages. That has grown to be crucial, especially in light of the continent’s current tightening liquidity conditions.
The goal of Norrsken22 is still to invest in about 20 businesses. The average investment ticket size for the fund is around $10 million. However, as the partners said in a prior interview, it might reach as high as $16 million, covering follow-on rounds in certain portfolio businesses.
Like Norrsken22, several other growth-stage companies have raised one to two funds in recent years to address the lack of finance in Series A and beyond, including Partech Africa, TLcom Finance, Algebra Ventures, Sawari Ventures, and Novastar Ventures. But some of them have also made investments in the pre-seed and seed phases, which is something Norrsken22 may look into if the proper chance presents itself. A tiny sum has been set aside for the early, most suitable period. We may invest small sums of money if something great comes our way, but that is not where our concentration is,” said Kolbe.
As it happens, a growth stage fund’s investment strategy places a lot of emphasis on getting portfolio firms ready for exits. Regarding the general partner’s statement, Norrsken22 conducts a comprehensive assessment of the possible exit scenarios. This involves identifying prospective buyers for the firms in its portfolio and evaluating the potential valuations that these purchasers could provide after the investment period expires. She said that the business has rejected investments when a strong exit strategy was not apparent and that this scrutiny is essential.
According to the managing partner, the company is considering consolidation involving regional industry leaders and exits for its portfolio firms through foreign strategic purchasers. Startups may also be able to go through multinational firms in Africa. Since some of these organizations find it challenging to develop internally, they may look to acquire tech startups that they can either keep as independent entities under a new name or incorporate into their operations. An advisory group of corporate executives from international corporations in the banking, telecommunications, real estate, and agriculture sectors supports Norrsken22’s first fund.
