Japanese VCs are at the forefront of the startup investment scene in Africa, perhaps the only continent with majority of its potential for innovation untapped.
The Japanese venture capital firm Uncovered Fund recently launched a $15 million kitty to support the African startups. Takuma Terakubo, the head of Uncovered Fund announced his new investment of $15 million to provide financial support to the startups in stages between seed and Series A. The Uncovered Fund, established in the year 2019, has invested $3.5 million between 2019 and 2020 to support several budding startups. For its next lot of investments, the company plans to invest between $50,000 and $500,000 into several South African, Nigerian, and Kenyan companies working on fintech, retail, logistics, health, agritech, mobility, and smart cities sectors.
The head of this venture capital firm Terakubo was the former head of Samurai Incubate Africa. Uncovered Fund was launched in May 2018, led by Rena Yoneyama together with Samurai Incubate. This firm was among the pioneers of Japanese venture capital funds dedicated to early-stage African startups. During his tenure at Samurai, the firm raised about $2.5 Million for the African startups based in Uganda, Nigeria, South Africa, Kenya, Ghana, and Rwanda. Samurai has financed more than 10 startups with an amount similar to Uncovered Funds during this period.
In one of his latest statements about Uncovered Fund, Terakubo revealed that at Uncovered, they will be focusing not only on investments but will also provide “long-term growth support, including follow-on investment.” He also mentioned, the company will also provide financial and technical supports to these rising Startups.
Investments Made So Far
The Japanese VC has kickstarted its funding program by backing five startups across various sectors and markets. The companies include the Kenyan e-com platform Sky Garden; Gozem, a Francophone Africa mobility startup, Kenyan fintech company LipaLater; Africa-focused and US-based health-tech startup, RxAII; and Nigerian digital freight startup, SEND Technologies.
In his statement, Terakubo also revealed that Uncovered will be investing in other African countries in the near future. He said that his company is in search of potential African startups to expand their business in multiple countries. The company will be joining hands with other early-stage Asian venture capital firms. Some of these VC firms are Kepple Africa, Future Hub, and Sherpa Ventures. Terakubo plans to increase this number by funding 15 other startups in 2021. The focus is to extend this synergy between Asian investors and African founders.
Collaboration with Traditional African Companies
African companies are getting exposure and support from international businesses. The trend started in 2017 when the commodities trader Mitsui & Co participated in Google’s CSquared fiber-optic project in Ghana, Uganda, and Nigeria. Ohara Pharmaceutical, a manufacturer and distributor of pharmaceutical products is among the companies that invested in African Startups. Ohara has invested around $10 million in April 2020 to the Nigerian startup Helium Health’s first round of financing.
Toyota, the Japanese automaker has undertaken some corporate venture-capital activities via its subsidiary Toyota Tsusho and CFAO. The company is going to invest in a Kenyan information and communications technology company Data Integrated. In early February, Japan government’s International Cooperation Agency has decided to kickstart Ninja, its acceleration program based in Nairobi. The Ninja will help other Japanese VC firms to work and invest in new African startups.
New Japanese investments into African startups are obviously a positive sign for the African business sectors. The investments by Japanese venture capital firms will not only strengthen the business structures for these African startups but will also provide them with better exposure in the international business market in the future.
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Besides strengthening the financial position for these startups, Japan is also making its own footing beside the world’s two biggest economies, the United States and China. Currently, China is the largest investor in the African market, financing one out of every five projects in the continent. With trades of more than $114 billion in 2016, China was also the largest trading partner for the African countries. But China’s lending practices In Africa have been subjected to criticism lately especially post COVID-19 pandemic. In such a scenario, Japanese VC firms might get an upper hand in the near future. In recent times Japan has made itself clear that it will not burden its partners with debts. However, it will be investing together to develop a better approach in line with the UN Sustainable Development Goals (also known as Global Goals) and Africa’s Agenda 2063.
China is the largest investor in the African market, financing one out of every five projects in the continent.
So, these rather small investments will hopefully pave the way for stronger business collaborations for startups in African countries in the future.