Microtraction, an early-stage venture capital firm that invests in African tech entrepreneurs at the pre-seed stage announces a $15M first close of its second fund. This comes in the light of the market downturn and expected slow down of an inflow of foreign investment into early-stage African startups.
Founded by Yele Bademosi and Kwamena Afful in 2017, with initial backing from PAVE Investments, Michael Seibel, Andy Volk, and Chris Shultz, we have invested in 36 companies comprising 83 founders across 2 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. Some of the companies we have backed since their pre-seed stage 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.
With the goal of being the most accessible and preferred source of pre-seed funding for African tech entrepreneurs, our strategy had to be spot on. 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.
We have consistently invested in founders on the continent and will continue to do so in spite of the market conditions. Through our debut fund, we backed 19 companies in 4 countries over 3 years. Of the 19 companies, 14 of them got into global accelerators, 10 are valued at $10m and above, 37% have female co-founders and 18 of them have raised follow-on funding. These companies have a combined valuation of $540m+.
5 years ago, the aim was to bridge the pre-seed funding gap and to be the first check investor for the very 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 that are on the right track to building successful businesses and those that are not quite there yet, is access to a rich and valuable community that increases the odds of success,” _ Dayo Koleowo, Partner at Microtraction.
In an effort 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.
In order 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. For now, the DAO will operate on an invite-only basis and will be launching 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 it’s going to 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.
At Microtraction, our long-term mission is to accelerate Africa’s transition to a sustainable and developed economy. We do this by investing in entrepreneurs who leverage technology, capital, and innovation to try and solve some of the pressing challenges on the continent. If you are working on solving one of these problems, we should talk!
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