Investment

Wealthiest Swedes back new African tech investment fund

Niklas Adalberth made his money in tech. For a few years now, the co-founder of Klarna Bank, the Swedish payments business, notionally worth $46 billion, has been ploughing his considerable wealth back into younger entrepreneurs. This vision – of tech entrepreneurs investing in the sector’s next generation – led to the creation of his Norrsken Foundation in 2016.

Together with other successful Swedish tech founders, Adalberth’s focus has primarily been on European startups. The foundation’s first VC fund closed at €61 million in 2019. Its anchor investors included family office Ramsbury Invest, the founders of unicorn companies King Digital Entertainment and Mojang (each video game developers), Daniel Wellington (a watch brand), and Saminvest (the Swedish government’s venture capital firm).

In 2021, African startups raised $4.6 billion in disclosed funding, according to research consultancy Briter Bridges. Two-thirds of that total went to fintech firms

Adalberth and his team at Norrsken aren’t standing still. Last month, they announced a new $200 million fund (“Norrsken22”) aimed at promising African tech entrepreneurs. “Africa has the youngest continent in the world. 60% of our population is under the age of 25,” says the fund’s managing partner Natalie Kolbe. “Technology is enabling us to leapfrog a lot of legacy industries, and that presents huge investment opportunities.”

Like Norrsken’s European fund, investors in the Norrsken22 fund are successful entrepreneurs in their own right. They include Niklas Zennström of Atomico; Jacob de Geer of iZettle AB; Niklas Ostberg of Delivery Hero; Carl Manneh of Mojang; Sebastian Knutsson of King Digital Entertainment; Willard Ahdritz of Kobalt Music Group; Dan Olofsson of Sigma; Björn Zethraeus of Sinch, and others.

This trend – of entrepreneurs investing in entrepreneurs – is taking off across Africa too. Various investment vehicles have launched in recent years seeking to have the same impact. Funds like Future Africa, Launch Africa, and Kepple Africa are leveraging their experience, relationships, and capital to make an impact and further support the continent’s tech ecosystem.

In 2021, African startups raised $4.6 billion in disclosed funding, according to research consultancy Briter Bridges. Two-thirds of that total went to fintech firms. “Investment in tech-enabled businesses has pretty much doubled every year since 2017,” Norrsken’s Kolbe says. “That is creating an ecosystem that flourishes but it’s also drawing more capital to the region, which is fantastic.”

And while there’s a lot of goodwill toward founders giving back, there’s plenty in it for them too. According to a recent article by Rest of World, when Flutterwave, a fintech business that enables cross-border payments became a unicorn in March 2021, several members of the Afropreneur Angels Group were able to partially exit with returns of between 30 to 116 times their original investment. The report highlights research by African Business Angels Network (and Briter Bridges) which found that “most angel investors invest up to $50,000.”

The Norrsken22 fund is a typical 10-year VC fund. Its managers are looking to invest in businesses that have big addressable markets across fintech, medtech, edtech and market enablement, an area that seeks to break down barriers to trade. 

Most of the fund’s capital will go to Series B and C  funding rounds where businesses are already established, show a good product-market fit, and offer a product not easily replicable by rivals.

According to Kolbe, most family offices seeking a slice of the action in Africa are investing through funds where managers have deep on-the-ground experience. “Most high-net-worth individuals and family offices that provide capital are looking for something different,” she says. “They understand the technology trajectory, they understand that Africa has potential, and they are willing to put some of their capital at risk to realise that potential.”

The story of Flutterwave best demonstrates the speed and potential of African tech markets. The company launched in 2016 and since then, has raised $484 million from a variety of global investors. Its latest $250 million Series D raise now values the company at over $3 billion, making it Africa’s most valuable tech business.

Since launch, the company has processed over 200 million transactions worth over $16 billion across 34 African countries. It plans to ramp up customer acquisition within existing markets, the development of complementary products, and its M&A activity. Its co-founder Olugbenga (GB) Agboola is also an investor in the Norrsken22 fund.

The Norrsken Africa team operate in the top tech hubs of Africa – Kenya, Nigeria, South Africa, and Ghana. “70% of the capital that goes into the tech space goes into these markets. The other big market is Egypt, which we are looking at,” Kolbe says.

“There’s so much activity happening in this space. It’s like drinking from a firehose,” she says. “It’s at times overwhelming but it’s a good problem to have. Our job is to pick the best of the best and ensure that we’re directing our resources well.”

 

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