Pan-African venture capital firm 4DX Ventures has completed the final close of its second fund at $60 million. The second fund, launched in the first quarter of this year, was expected to close at $50 million, but investor and limited partner (LP) interest saw the fund oversubscribed.
The LPs involved are unnamed. They include U.S.-based asset managers, a university endowment, global family offices, tech founders, hedge fund portfolio managers and investors from private equity and venture capital, the firm said.
The effort by the New York, Accra and Cairo-based firm, an early investor in African unicorns Flutterwave and Andela, follows large fund closes by the likes of Partech, Novastar, Algebra and TLcom Capital that have sporadically happened on the continent.
With large funds, most of these firms tend to find their sweet spots in growth-stage deals, particularly in Series A and B. But recently, they are beginning to get involved in earlier rounds to gain stakes to help them compete for the late-stage investments.
For instance, TLcom Capital, a $71 million pan-African fund that initially made investments only in the growth stage, led pre-seed rounds in Nigeria’s Okra and Autochek last year (it co-led the latter with 4DX Ventures).
Pre-seed to Series B are the stages on which 4DX Ventures is focused, founding partners Walter Baddoo and Peter Orth told TechCrunch in an interview.
“The quality of founders and team is really our North Star. And our goal is to partner with the very best teams going after transformative opportunities across the continent,” Orth said. “And you know, Walter and I personally have experienced investing in companies from the idea stage to public markets and, generally speaking, we think that from the pre-seed to Series B stage, it’s still early enough to deliver the type of returns that we’re looking for as an early-stage fund.”
The founding partners have known each other for more than 20 years. Between them, they have years of operational and financial experience working at Morgan Stanley, J.P. Morgan and Bridgewater Associates. They started 4DX Ventures officially in 2017 after three years of investing personal funds in African startups. Global talent marketplace Andela and payments company Flutterwave were part of the firm’s early success, generating significant secondary returns due to their unicorn status.
4DX Ventures’ first fund was a bit over $20 million and it invested in startups such as Ghanaian health tech startup mPharma and Kenyan B2B e-commerce platform Sokowatch. It has welcomed the likes of Autochek, Breadfast, MaxAB, Taager, Trella and Yoco from this second fund of $60 million.
Pan-African VC firms predominantly write their checks to the Big Four markets: Nigeria, South Africa, Egypt and Kenya because that’s where most of the continent’s opportunities reside. 4DX Ventures is not entirely different, as most of its portfolio companies are based in these four countries. But Orth is quick to add that the firm has begun looking into other countries, especially in the Francophone region; case in point, the investment it co-led into Ivorian fintech CinetPay this month.
As for industries, 4DX Ventures says it is a “generalist,” but most of its investments have taken place in fintech, B2B e-commerce, healthcare and logistics.
“Our goal is ultimately to invest in companies that are building products that solve foundational problems on the continent and also in the largest markets because the size of the market matters quite a bit for the potential outcome of companies,” Baddoo said about the markets and industries that pique 4DX’s interests.
“And so we love when folks are building products in markets that are truly large, and potentiallygive the companies that opportunity to have a pretty dramatic growth path throughout their lifecycle.”
Baddoo also highlighted that asides from the market and industries, 4DX Ventures also seeks “strong founders with a growth mindset who have a lot of grit” and can “marry a very clear vision of what they’re trying to build with a thoughtful approach to strategy and execution.”
The pan-African firm writes checks of about “a few $100,000 to a few million” across all stages (pre-seed to Series B), according to Orth.
Since launching its first fund, 4DX Ventures has invested in more than 40 companies across Africa (its primary market), the Middle East and the U.S., with a handful of companies. One of its portfolio companies, U.S.-based Swarm Technologies, got acquired by SpaceX.
4DX Ventures says its portfolio companies have raised more than $1.2 billion in funding, one of the largest follow-on investments known for an African-focused fund.
The close of this second fund also brought additional experience to the firm’s management team in two general partners, Dan Marlo and Raaid Ahmad. Before their appointment, the pair served as senior advisors to the firm since 2017.
Both bring years of experience operating, investing and advising companies in various sectors such as fintech, telco, software, sports, social and health, the firm said in a statement.
“Both Dan Marlo and Raaid have been senior advisors to 4DX since the beginning of the fund. And prior to them joining as senior advisors, we’ve known each other for a decade. They are both experienced operators who have a scarce combination of skill sets. And going into our next Fund and the future of the company, we couldn’t think of two better people to join to help us, you know, carry the firm into our next chapter here,” said Orth on the appointment.
NBA Hall of Famer and Congolese-American former professional basketball player Dikembe Mutombo, known for his humanitarian and entrepreneurial work, especially for Africans and African Americans, will now serve in the firm’s senior advisory role.
He joins a current senior advisor roster that includes Karen Karniol-Tambour of Bridgewater Associates, Jay Zaveri of Social Capital and Sakya Duvvuru of Nellore Capital.
Baddoo, who is Ghanaian by birth, is bullish on his firm’s work and hinted that his association with the continent is part of what drives the deals 4DX Ventures makes.
“Growing up in Accra, Ghana, a lot of these companies are solving problems that I witnessed, personally firsthand. And so the fact that we can dedicate our time to back some of the greatest founders of this generation that are building truly special and important companies on a continent, to me, is a dream. And the ability to do that where I come from is quite important. So my hope and belief is that 4DX will continue to play a very pivotal role in the ecosystem.”
By TechCrunch