Unicorns-Backed Norrsken22 bets on Africa’s Fintech boom

Bloomberg | Africa’s technology and startup firms are becoming too attractive for international investors to ignore, according to a partner at a fund focused on investments in the continent.

“We are already seeing some investors, especially I would say even in the first quarter of this year, really looking at investing large tickets in Africa businesses,” said Lexi Novitske, a general partner with Norrsken22, a US$205 million Africa-focused fund. “It’s because they are seeing healthier numbers in a lot of these companies than they are seeing in their own market,” she told Bloomberg.

Such investments are likely to offer some relief to African technology and startup firms after venture capital inflows plummeted last year. According to a recent report by the African Private Capital Association, they fell 31 percent in 2023 to US$4.5 billion from a year earlier after investors abandoned African economies struggling with high inflation and weakening local currencies.

“The fact that these companies are building such good platforms despite all of that is getting international investors excited,” said Novitske.

Novitske expects investments to surpass pre-2020 levels, but to trail 2021 and 2022 when exuberance in the aftermath of the pandemic saw a lot of hasty investing.

Coming back

“I think it will be much healthier,” she said. “I think investors will start coming back and investing with a lot more due diligence, hopefully more concentrated positions where they are much more involved in operations of companies and with a much more reasonable valuation.”

Norskenn22 has invested in six companies so far, including South Africa’s neobank Tyme Group, and has three other investments in the pipeline, said Novitske. It plans to increase that number to as many as 20 companies by the end of 2025, she said.

The fund, set up in 2022, aims to support companies providing “lean-tech solutions,” including software, web-based platforms and artificial intelligence. Among backers are 30 founders of so-called unicorns, or companies that have achieved a pre-market valuation of at least US$1 billion.

The fund has investments in South Africa, Nigeria, Kenya and Egypt.

“We are also looking a lot more at digital payments and neobanks in Francophone West Africa as a market,” Novitske said. “So far it has been quite low and quite slow to grow, but we also think that a regulation shift is happening now that it will make that digital adoption much faster over the next coming five years.”