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EIB boosts African start-ups with $30m kitty

By , Africa editor
Africa , 10 Jan 2024
Margaritis Schinas, vice-president of the European Commission.
Margaritis Schinas, vice-president of the European Commission.

The European Investment Bank (EIB) Global today announced a fresh equity investment of $30 million in Seedstars Africa Ventures I, which provides capital to African entrepreneurs.

According to the bank, the $30 million equity investment will improve access to risk finance for innovative enterprises and start-ups throughout Africa.

The EU is backing the EIB Global’s investment of $30 million, with $20 million coming from the ACP Trust Fund and $10 million from the Boost Africa project.

Boost Africa is a cooperative project of the African Development Bank, EIB, the European Commission, and the Secretariat of the Organisation of African, Caribbean, and Pacific (APC) states under the 11th European Development Fund.

The ACP Trust Fund invests in high-impact projects for the private sector by offering technical assistance and financial instruments such as equity, quasi-equity, subordinated debt, risk-sharing and local currency lending.

The EIB today announced that with this investment, it has fully implemented Boost Africa, a programme launched in 2016 to help African entrepreneurs create long-term jobs through venture financing.

It stated that under Boost Africa, companies invested in by Seedstars Africa Ventures 1 will receive technical assistance to improve business skills and knowledge backed by the EU.

Maxime Bouan, Tamim El Zein, and Bruce Nsereko Lule founded Seedstars Africa Ventures I in collaboration with Seedstars, a global organisation that invests and supports entrepreneurs in emerging markets, and LBO France, a multi-country, multi-specialist investment platform.

Seedstars Africa Ventures invests in Seed+ and Series A rounds, with the opportunity to considerably scale up, successfully spanning the existing capital pools, according to the EIB.

It went on to say: "The fund leads investment rounds to facilitate syndication and provides strong operational support that is critically lacking in the regional venture capital space. The fund will invest in companies that create and deploy digital technologies, particularly those that address basic necessities, like education, healthcare, and utilities, or improve goods, services, and efficiency.”

Ambroise Fayolle, VP, EIB, emphasised the importance of promoting innovation and digitalisation for building strong and sustainable economies. “African entrepreneurs hold the key to the continent's future, as they create jobs, reduce inequality, and improve people's lives.”

LBO France's chairman, Robert Daussun, and CEO, Stéphanie Casciola, indicated that they had strengthened LBO’s position in Africa, by focusing on dynamic areas and backing disruptive entrepreneurs. They added that LBO’s involvement aligns with their focus on a diverse portfolio of alternative assets, and provides investors with access to Africa’s growth story while also pursuing ESG goals.

Margaritis Schinas, vice-president of the European Commission, said: "The digital sector is a fundamental driver of growth and innovation. Small and medium-sized businesses, together with start-ups, are driving the digital economy. Kenyan and African digital economies have enormous potential, and assisting businesses in accessing funding can be a game changer in fostering quality growth and jobs, which is a shared aim for the EU and our African partners."

According to the EIB, Venture capital investments reached US$4.8 billion in Africa in 2022, a +270% increase from the US$1.3 billion invested in 2019.

"Despite this tremendous growth, a significant equity gap continues to exist at the early stages of funding on the continent, calling for more investors in the space," the EIB stated.

Furthermore, it stated that global challenges over the last 18 months have made it more difficult for businesses to obtain financing, particularly in the early stages of development.

It went on to say: "This has limited the expansion of innovative technology companies."

The EIB stated that promoting private sector development and the digital economy will help to achieve inclusive economic growth while minimising economic and social inequities.

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