Chanzo Capital seeks up to $100m to hunt African unicorns

By David Whitehouse
Posted on Monday, 2 August 2021 08:30

Chanzo Capital managing partner Eric Osiakwan. Photo supplied.

Chanzo Capital is seeking to raise between $50m and $100m for a new fund which will enable African tech start-ups to achieve scale, managing partner Eric Osiakwan tells The Africa Report.

The fund will invest in fintech, e-commerce, digital health, logistics, delivery, agricultural and educational tech businesses, Osiakwan says from Nairobi. He is targeting emerging markets as well as tech investors, and plans a first closing of the fundraising at the end of November, by which he aims to have raised about $20m to $25m. A commitment for a $10m investment has been secured, he adds.

The firm already invests in high-tech startups and scaleups in Kenya, Ivory Coast, Nigeria, Ghana and South Africa, which Osiakwan calls the “KINGS”.

The existing KINGS start-up fund has a net asset value of about $50m invested in 12 companies including Hubtel, HotelOnline, Farmerline and The new KINGS scale-up fund will be aimed at helping companies that have achieved scale in their national markets to expand internationally, Osiakwan says.

The rise of unicorns such as Airtel Africa and Flutterwave shows that the digital frontier has shifted from Asia to Africa, Osiakwan says. “The new oil is data. African companies can become global unicorns.”

  • The scale-up fund will increase Chanzo Capital’s holdings in some of its existing portfolio companies as well as investment in new businesses, Osiakwan says.
  • The role of the fund is not just to provide capital, but also help companies to increase capacity, Osiakwan says.
  • Management structures often need strengthening when companies expand to new countries, and local management teams need to be established.

The fund will also help companies to build business connections in their new foreign markets, he says. “The business is built with the local [citizens] in mind. People don’t know the country next door.”

The African fintech sector is heating up and big tech does not want to be left out.

The new fund has a minimum investment of $5m for institutions and $500,000 for individuals. It may also seek to expand the firm’s geographic focus by investing in new countries such as Egypt and Senegal.

Currency Risk

The fact that the fund is diversified between Kenya, Ghana and the Ivory Coast – which Osiakwan classifies as having relatively stable currencies – and the more volatile resource-driven currencies of Nigeria and South Africa, helps reduce currency risks for dollar investors, Osiakwan says.

The fund also has an internal hedging strategy in place, and tries to get portfolio companies to use dollars as much as possible.

Ten years ago, Osiakwan says, the idea of an African tech ecosystem was no more than a dream. Today, he argues, it has become a reality. Some of the big banks in Africa have realised that if they are not careful, African fintechs may take over their territory.

Fintechs like Flutterwave, Interswitch, Fawry, Airtel Money, MTN MoMo or MPESA may start buying banks, Osiakwan says, citing the acquisition of Century Microfinance Bank by the fintech Branch International in Kenya, as a sign of things to come. “The African fintech sector is heating up and big tech does not want to be left out.”

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