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Japanese venture-capitalists get behind African startups

By Quentin Velluet
Posted on Tuesday, 23 February 2021 18:48

Takuma Terakubo, head of the Japanese venture capital firm Uncovered Fund. © FQ

Japan’s Uncovered Fund has launched a $15m fund to back early-stage African startups that will close in June. Since 2018, this Tokyo-based outfit and others like it have been among the most active startup investors on the continent.

Takuma Terakubo is not new to Africa. After having invested his entire first fund of $3.5m between 2019 and 2020, the head of Uncovered Fund – a Japanese venture capital firm created in 2019 – announced on 16 February that a $15m fund intended for rounds of financing between seed and Series A stages will be closing in June.

Retail, fintech, health…

Uncovered Fund plans to invest between $50,000 and $500,000 into Kenyan, Nigerian and South African companies. It wants to focus on the retail, fintech, health, logistics, mobility, agritech and smart cities sectors.

In the wake of this announcement, the Japanese venture-capital firm revealed that it has already acquired stakes in several companies. These include SkyGarden, a Kenyan e-commerce platform, Rxall, a Nigerian health tech startup, LipaLater, a Kenyan fintech for East African companies, the Togolese rise-sharing service Gozem and finally in the Nigerian digital freight startup Send, which facilitates customs procedures for companies.

Terakubo was previously head of Samurai Incubate Africa (formerly known as Leapfrog Ventures, different from its US counterpart). This joint venture was launched in May 2018 together with Samurai Incubate, led by Rena Yoneyama, and was one of the first Japanese funds dedicated to early-stage African startups.

Through this joint venture, Samurai has invested in 25 companies since 2018 and launched a second fund of more than $18m in September 2020.

More than 70 investments for Kepple

Japanese venture-capital firms are known for investing heavily in the continent.

In 2020, Kepple Africa Ventures, for example, stood out by making 14 deals, whereas the average number of deals made by international private-equity investors on the continent is between three and five per year. “Kepple has already completed five deals in the first two months of 2021,” says industry specialist Maxime Bayen.

Based in Nairobi, Kepple Africa Ventures – led by Ryosuke Yamawaki, Takahiro Kanzaki and Satoshi Shinada – also has an office in Lagos. Since its launch, the company has raised $12m and invested in more than 70 startups across nine countries.

Its portfolio includes Bamboo, an application created in Lagos and incubated by the US startup accelerator Y Combinator that allows Nigerians to invest on Wall Street. In April 2020, Bamboo completed a financing round estimated at between $1m and $2m.

Kepple also sits on the board of Healthlane, an e-health platform that centralises services such as telemedicine, drug purchasing and appointment scheduling. Founded in Lagos by Alain Nteff, it raised $2.4m in May 2020 after also being incubated by Y Combinator.

Traditional companies are getting involved

Commodities trader Mitsui & Co’s participation since 2017 in Google’s CSquared fibre-optic project – present in Uganda, Ghana and Libera – has encouraged other traditional companies to get involved in Africa’s startup world.

This includes Ohara Pharmaceutical, a manufacturer and distributor of pharmaceutical products since 1964, which contributed to Helium Health’s first round of financing ($10m in April 2020). This Nigerian startup has facilitated the digitisation of health services on the continent since 2016.

Toyota – via its subsidiary Toyota Tsusho and CFAO – has also decided to undertake some corporate venture-capital activities by investing in Data Integrated, a Kenyan information and communications technology company created in 2012 by Mary Mwangi.

More discreetly, the investment branch of the financial services company SBI Group participated in the $10m seed financing of the Nigerian digital bank Kuda in November 2020.

At the beginning of the month, the government’s Japan International Cooperation Agency – which has been observing this new trend – decided to launch its acceleration programme in Nairobi called Ninja. This programme will further help Japanese venture-capital firms identify new and emerging African startups.

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