Venture capital Uncap has launched Unconventional Capital, a €30 million fund aimed at bridging the capital raising gap that early-stage African small and medium-sized enterprises (SMEs) encounter as they expand.

Unconventional Capital provides non-dilutive, revenue-based finance to early-stage SMEs in Africa. 

 Unconventional Capital was launched today and will work with key partners such as SAIS, an ag-tech initiative funded by the German Federal Ministry for Economic Cooperation and Development (BMZ) and implemented by GIZ (Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH), and O-Farms, a circular agriculture program run by Bopinc and funded by the Ikea Foundation.

The Fund's establishment comes at a time when venture capital players are performing a crucial role on the continent, investing in innovative companies and start-ups developing digital solutions, according to analysts.

Uncap said by collaborating with its partners, the fund hopes to unlock unlock growth opportunities for businesses and harness its expertise and networks to better support SMEs in high-impact sectors.

The Fund, according to Uncap, has received support from global institutions such as the Bill and Melinda Gates Foundation and the Bayer Foundation, demonstrating its reputation and growing confidence in Unconventional Capital's innovative approach to alternative finance. 

The financial model, which emphasises revenue-based financing above stock dilution, offers more flexible funding options for African enterprises facing early-stage challenges, said Uncap.

Uncap also announced the separation of its financial operations from its unique technology platform, Level—a stand-alone SaaS platform designed to simplify investment management for funders and accelerators across Africa. 

Uncap said that this move will allow it to focus on providing personalised financing solutions while also expanding its tech-driven investment support services.

The Fund will be co-led by Uncap's current investment principal, Esther Ndeti, and the CEO, Franziska Reh, who will also serve as managing partners. 

Ndeti pointed out that Unconventional Capital seeks to transform SME financing by establishing an environment in which more enterprises may thrive in underserved areas and contribute to long-term economic growth across the continent. 

She explained: "SMEs account for about 90% of African businesses, yet they face many challenges in raising capital. The inefficiency of African capital markets in effectively supporting SMEs, coupled with limited visibility to a broad investor base, continues to hinder access to essential funding for small and medium-sized enterprises across the continent.

“Over the past three years, we've championed innovative, alternative financing for African businesses. We hope this Fund will address capital gaps for early-stage SMEs as they scale, deepening our impact. In the end, we want to not only support more businesses but also set new standards in the industry for innovation and inclusion."