Cathay AfricInvest Innovation Fund (CAIF), a Pan-African fund launched via a partnership between AfricInvest, a multi-asset investment platform in Africa and Cathay Innovation, a European-born but global-focused venture capital firm, has achieved a final close of €110 million.
Just last week, Cathay Innovation announced that it was targeting to raise €1 billion for its third fund to invest in growth and later-stage companies across Europe, North America, Latin America and Asia. Within the last three months, the fund launched two sister entities: a $110 million crypto fund and a $500 million health fund.
Cathay Innovation carries a different approach in Africa. Unlike other regions where the firm invests from its multistage fund and ventures on its own, for Africa, it partnered with the Tunisian-based AfricInvest in 2019 to back promising early to growth-stage startups on the continent.
Founded in 1994, AfricInvest handles multiple asset classes, from private equity to venture capital to private credit. Over the past decades, the firm has raised more than $2 billion across 21 funds. Its 200+ portfolio companies, of which 106 have exited, span 25 countries. A track record such as this is what Cathay Innovation — which has $2 billion in AUM and offices across San Francisco, New York, Paris, Shanghai, Beijing and Singapore — sought four years ago when bought firms struck the partnership and formed CAIF.
CAIF first announced its fund in 2019. At the time, it was looking to raise $168 million for Series A to Series C investments. While the fund’s final close suggests that the fundraising plans didn’t go as planned for various reasons, Denis Barrier, co-founder and CEO of Cathay Innovation, told TechCrunch that CAIF adjusted its expectations and settled on raising €100 million. “So, in fact, we exceeded this target in terms of fundraising,” he said.
The chief executive also highlighted how CAIF’s backing of early-stage founders allowed the firm to change its strategy and reaffirm its initial conviction of making seed to Series A deals. However, it has made some later-stage bets too. Per a statement, the firm invests up to €1 million in seed stage and between €1 million and €10 million in growth-stage businesses.
Yassine Oussaifi, a partner at AfricInvest and co-head of CAIF, said the firm backs startups with “strong” unique selling propositions (USPs) and helps them to become regional leaders before they pursue global ambitions. It’s a step-by-step the partner narrates. Africa is a big but fragmented market. As startups need to expand from their home countries to another — for instance, Lagos to Nairobi or Cairo to Casablanca — to achieve massive scale, the importance of firms like CAIF with resources on the ground cannot be overstated. But beyond these continental borders, utilizing Cathay Innovation’s network is critical.
“We work hand in hand in investing in Africa,” Oussaifi told TechCrunch on a call. “AfricInvest brings its network and presence on the ground to African entrepreneurs. And then the next stage, we work with Cathay to help these companies expand beyond Africa, go to other emerging markets, and work with the expertise and know-how in markets they have developed across the years.”
South African startups Aerobotics and WhereIsMyTransport are examples that show this process. Both companies, having made significant headway in their home countries and other African markets, expanded to the U.S. and Mexico, respectively, with eyes on other international markets. In some cases, CAIF has funded companies incorporated outside Africa but with operations on the continent — for instance, Heetch, a Paris-headquartered ride-hailing startup active in Algeria and Morocco. Cathay Innovation was an investor in Heetch before CAIF backed the startup following its move into Africa.
There are seven other startups in CAIF’s portfolio: 54gene, OZÉ, Migo, PalmPay, KaiOS, Boomplay and GOMYCODE (the fund co-led its recent round). They represent the sectors CAIF is keen on, namely fintech, mobility, digital content, agritech, health tech and edtech.
“Our objective was that our portfolio companies will bring their products and services to benefit 100 million users in Africa. We’ve already reached almost 150 million users that have used our products or services,” said Oussaifi on the wide-reaching impact of portfolio startups that CAIF manages across its 8 locations.
Africa’s venture capital scene reached an inflection point last year, topping over $5 billion, more than it had combined in the previous two years. Global funds have been the main catalysts but take nothing away from large Pan-African funds such as TLcom Capital, Partech, Norrsken22, Novastar — and now CAIF — who have also pulled their weight by raising nearly $800 million in available capital between themselves.
CAIF noted that this final close places it in a solid position to double down its efforts to focus on “innovative and scalable post-revenue” ventures. Several LPs invested in this fund, including BIO, EIB, Proparco, SIFEM, AfricaGrow, Triodos Investment Management and FMO. CAIF, in a statement, said DFIs, multinational corporations and HNIs across Europe, Africa and the Middle East were also involved.
Like many funds in this year’s first half, CAIF is announcing its fund’s close amid venture capital slowdown and economic downturn. In response to how the firm approaches investments during this period, Barrier said: “In our portfolio, we see companies with good metrics and continue to expand. So even if there is a dip in valuation, the fundamentals of digitization and innovation in the next ten years are more true than ever. So we will continue to be very confident with what we are doing. If our portfolio companies stopped doing business and aren’t growing, we could be worried. But it’s not the case.”
Oussaifi, giving his thoughts on a broader context, believes the venture capital slowdown is a short-term event in Africa. As long as the tech ecosystem continues to evolve and diversify from fintech and the Big Four to other sectors and regions, startups will continue to raise money to grow and scale, he said.