Japanese VC buys stake in a British Africa-focused fund

In a move that underscores the growing interest of Japanese venture capital firms in African startups, SBI Holdings, a prominent Japanese VC group, has recently acquired a minority stake in Novastar Ventures, a London-based Africa-focused venture capital outfit. SBI Holdings has pledged an impressive investment of US$40m into Novastar Ventures' upcoming funds and has committed to securing matching investments from other Japanese institutional investors.

Novastar Ventures, founded in 2014, has raised over US$200m from institutional investors and is currently deploying capital from its second fund. Notable investments by Novastar Ventures include Moniepoint, a Nigerian banking and payment platform aimed at supporting SMEs, BasiGo, an electric bus startup based in Nairobi, and mPharma, a provider of affordable primary care and community pharmacy services.

As part of this strategic partnership, SBI Holdings will assume a non-executive position on Novastar's management board. Riki Yamauchi, a former Tokyo-based investment banker, will join Novastar's team to lead the execution of the partnership's objectives.

Yoshitaka Kitao, the President and CEO of SBI Holdings, expressed that the youthful and tech-savvy population, abundant natural resources, and increasing urbanization in Africa were significant factors driving their interest in the continent. With the African population projected to double by 2050, with two-thirds of this growth occurring in urban areas, the potential for investment and market expansion is substantial.

SBI Holdings' investment in Novastar Ventures reflects a broader trend of Japanese interest in African startups. In September, AAIC Investment, a Japanese-run VC firm based in Singapore, announced new commitments from various Japanese corporate entities to its Africa Innovation & Healthcare Fund (AHF2), which primarily invests in healthcare-related startups. Pharmaceutical companies like Eisai and Ohara, medical instrument manufacturer Asahi Intec, and general trading company Marubeni Corporation are among the Japanese investors participating in this initiative, seeking to leverage Africa's rapidly expanding healthcare sector and market their products across the continent.

Susumu Tsubaki, CEO of AAIC, noted in a previous interview with the NTU-SBF Centre for African Studies that Japanese firms, faced with a declining birth rate and aging population at home, are actively exploring new investment opportunities abroad, with Africa emerging as a promising destination.

Further highlighting Japanese involvement in the African startup ecosystem, Kepple Africa Ventures, another leading Japanese VC firm, has already invested in over 100 African startups. Notable among these investments are Moove, a provider of vehicle financing for ride-hailing and e-logistics drivers, and Kenya's Koko Networks, specializing in clean ethanol cooking fuel and related products.

Toyota Tsusho, the trading arm of the Toyota Group, has established Mobility 54, an Africa-focused corporate venture capital unit, which has supported over a dozen mobility-related startups. Their investments include Tugende, offering lease-to-own financing for motorcycle-taxi drivers in Uganda and Kenya, ETAP, a Nigerian company digitizing car insurance services, and Kenya's Data Integrated, providing public transport management systems and digital payment solutions for transport operators.

In 2018, Kentaro Sakakibara established Samurai Incubate, a firm with stakes in over 30 startups. During the pandemic, Samurai raised JPY2.026bn (US$13.5m) for its second fund from various investors, including Toyota Tsusho. Takuma Terakubo, formerly involved with Samurai Incubate, went on to found Uncovered Fund, which, in 2021, launched a US$15m vehicle to make early-stage investments in African ventures.

The partnership between SBI Holdings and Novastar Ventures signifies a growing trend of Japanese capital flowing into African startups, and this investment is poised to make a significant impact on the African startup ecosystem, potentially unlocking new opportunities for growth and innovation on the continent.

 

References

‘Figures of the week: Africa’s urbanization dynamics’, Brookings, 16 July 2020

‘Japan’s Uncovered Fund launches $15m fund to back early-stage startups in Africa’, 16 February 2021, TechCrunch

‘Samurai Incubate Inc. closed Samurai Africa 2nd general partnership’, Samurai Incubate, 15 April 2021

‘Japanese investor doubles down on the African healthcare market’, NTU-SBF Centre for African Studies, 23 February 2023

‘The Africa Fund (AHF2), managed by AAIC Investment, has received new participation from financial institutions and listed companies’, AAIC Investment, 26 October 2023

‘SBI Holdings and Novastar form US$80 million landmark partnership to catalyze Japanese investment in Africa’, Novastar Ventures, 02 November 2023

‘Investment portfolio’, Kepple Africa Ventures, Accessed 04 November 2023

‘About us’, Moniepoint, Accessed 05 November 2023

‘About us’, BasiGo, Accessed 05 November 2023

‘Our innovative partners’, Mobility 54, Accessed 05 November 2023