Corporate Venture Capital is Widely Misunderstood but Makes Sense for Africa

Corporate Venture Capital is Widely Misunderstood but Makes Sense for Africa
June 24, 2021 Peter Kisadha

In 2016, Fred Wilson, a partner at Union Square Ventures – with previous investments in Twitter, Etsy, Stripe, and Coinbase – railed against corporations making bets on startups. “Corporate investing is dumb,” he noted. As for the startups taking corporate money, Wilson said that it’s “because they can’t get from anyone else” and therefore “they do business with the devil.”

Wilson’s comments mirror sentiments held by entrepreneurs and traditional VCs who have a low view of large corporates when it comes to venture capital – viewing them as generally lacking knowledge and less savvy. This is evident especially when you observe that most entrepreneurs would rather exhaust every other fundraising avenue before considering talks with a large corporate organization. 

Likewise, the thought of investing alongside corporates sometimes draws apprehension from traditional VCs. Some take the extreme view regarding corporates as predatory and controlling and feel that their investments come with strings that everyone finds difficult to live with. 

But, the views held by Wilson as well as other entrepreneurs and investors against corporate venture capital cut against the grain. Research indicates that corporate venture capital (CVC) is becoming a well-established corporate development activity—one that is continually and increasingly funded alongside R&D and M&A

In 2020, CVC-backed funding soared to an all-time high of $73.1 billion according to a CB Insights report, increasing 24% from 2019. GV (formerly Google Ventures), Salesforce Ventures, and Intel Capital topped the list of most active CVCs. Some of these CVCs have already made investments into African startups or those operating across Africa. For example, GV has previously backed Zipline and Tala while Salesforce Ventures counts Andela and Samasource as portfolio companies.

In Africa, South Africa has registered some CVC activity from their leading corporates. Naspers, Standard Bank, and Nedbank have each in the past decade set up a CVC arm. 

Egypt’s Commercial International Bank also launched a CVC in 2018 called CVentures while EFG Hermes set up a joint venture with Egypt Ventures to invest in 10 startups every year. Safaricom Spark Fund, set up in 2014, was Kenya’s first CVC followed by Chandaria Group’s Chandaria Capital in 2017. The latter has investments into Sokowatch, Mobius, TradeDepot, Lynk, Ilara Health, Carry1st, and Kobo360. 

Despite these efforts, most of Africa’s large corporates still have a vague appreciation of the value that can come from investing in younger and innovative companies. They cannot get themselves to the point where they pull the trigger, even after having internally initiated the conversations. Partly because they are wedded to their traditional performance metrics and lines of business and therefore find it hard to appreciate the strategic value of investing in startups. 

Over the past 5 years, African fintechs have increasingly commanded the largest share of funding raised. Despite that, there’s been no involvement from the banks even when African banks are the most profitable globally leaving them with cash flow for strategic investments. Only a handful of the continent’s biggest 100 companies by market capitalization have made the foray into CVC, the majority of which are concentrated in South Africa. 

Except for Jumia and Takealot, which raised from MTN Group and Naspers respectively, no African startup with more than $100 million in venture capital raised to date counts a top African corporate among their backers. 

Currently, in Africa, four countries attract most of the venture capital – Nigeria, Kenya, South Africa, and Egypt. With Nigeria increasingly standing out especially after Paystack’s acquisition by Stripe and Flutterwave’s $170 million 2021 funding round that pushed its valuation to over $1 billion. The Nigerian Stock Exchange is the second biggest in sub-Saharan Africa and one of the main entry points to invest in Africa with around 200 listed companies. The companies that dominate the activity on the exchange are in the financial services industry as well FMCG, which are poised to be fundamentally affected by the shift in technology and consumer behaviour in return. For example, Nigeria has witnessed the number of banks shrink from 89 in 2004 to 27 in 2020 as they consolidate to stay relevant. This trend is likely to continue with the fintechs gaining ground

But Nigeria’s major corporates are yet to show interest in CVC. The country’s leading startups Flutterwave, Paystack, and Interswitch found more success raising from U.S. and Chinese corporations Visa, Mastercard, and Tencent. Others like are looking to Japanese corporations which are expressing interest in placing strategic bets in African startups.

However, we may soon see a change in Nigeria after the country ushered in new banking regulations with the Banks and Other Financial Institutions Act (BOFIA) 2020. This is important because banks are among the leading corporations in the country, accounting for 7 of the 10 most profitable firms on the Nigerian Stock Exchange, and now are able to take part in venture capital. 

Under Section 20 of the BOFIA 2020 act, Nigerian banks can allocate more funds to equity investments including in technology startups. Part of the section states that the “aggregate value of the equity participation of a bank in all enterprises both domestic and foreign shall not at any time exceed 40 per cent of its shareholders’ fund”. The old act pegged it at 20 per cent which was restrictive and limiting in terms of where banks could invest. 

The act also expanded the range of permissible asset investments by banks. The type of businesses in which banks may invest under BOFIA was amended to include private equity and venture capital “whose purpose is the promotion of the development of indigenous technology or a new venture in Nigeria”. This allows them to collaborate with other VCs and set up their own CVC vehicles.

Africa VC Needs Its Corporates

VC funding in Africa has grown by more than 40% per year since 2015. Technology is also on the path to infiltrate and shape every industry on the continent including traditional ones starting with banking, insurance, and financial services as well as healthcare. However, the venture capital industry in Africa is still in its infancy and takes up less than 1% of the global VC. 

On the other hand, due to their market dominance, corporates like banks and mobile network operators are the gatekeepers to key industries and markets in Africa. They have over the past decades invested in building infrastructure, capital, and expertise that can be crucially leveraged by most startups and investors that are looking to start out or enter a new market. 

Historically, African corporates have been cagey and defensive in their relationship with startups particularly because of the fear that allowing startups free rein might hurt their business. As a result, they have often stacked odds against new entrants or tried to compete by launching copycat solutions. A case in point is the ongoing dispute in Senegal between Wave and Orange

But, it doesn’t have to be this way. All parties – startups, VCs, and corporates – need to realize that there is more to gain by working together. 

African corporates don’t need to do everything and therefore have to choose the areas where they want to compete. In other areas, they are better off leveraging their financial resources and market position by venturing into CVC. Not only can the right CVC investments provide outsized financial returns, studies indicate that they will gain access to cutting-edge innovation and shore up areas of weakness.

In his 2018 op-ed for GSMA announcing the launch of Orange Digital Ventures Africa, Grégoire de Padirac noted that “the traditional ‘gatekeeper’ role of the mobile operator is being challenged”. He recommended that “to keep up with the accelerating pace of innovation, mobile operators will have to increasingly be more connected to the most promising startups on the continent and find ways to build sustainable win-win partnerships and business models and open their APIs.”

This recommendation extends to all industries because corporates usually have multi-dimensional objectives making a case for investments in companies developing products that could significantly reduce the corporate’s costs, open up new markets and/or distribution channels. In this case, strong synergies have to be identified that lead to wholesale evolution or improvement in the corporate’s long-term standing.

As an example, when Kobo360 raised its $20 million Series A led by Goldman Sachs, the startup revealed that Dangote Group was among its top clients. The group operates a fleet of over 10,000 trucks which constantly require maintenance, tracking, and routing. Such activities could be greatly enhanced by digital freight technology being developed by Kobo360. Dangote Group can therefore invest in the company to further gain access to its innovative technology that can be integrated into its day-to-day operation.

Startups and VCs also need to realize that Africa’s leading corporates can unlock much more than capital for them. Besides setting up CVCs to make direct investments, given their dominant positions in the key industries, Africa’s leading corporates already have the means and assets needed by the startups to overcome the continent’s structural challenges. Corporates can open up their ecosystem to new players, a pattern seen when some of the best companies invest in startups that are developing technologies complementary to their businesses.

Where to start from

Corporates looking to make a foray into CVC typically do so for two reasons; strategic or purely financial. Although in most cases, it is both.  

In case the corporate is after financial returns, it makes investments banking on the value and arbitrage that can be created by leveraging its money, brand, industry knowledge, distribution channels, and other qualitative advantages to improve the value of the asset being invested into. Stripe’s $200 million acquisition of Paystack, and the consequent command of an estimated $3 billion in additional valuation less than 7 months after as a direct result, perfectly fits into this scenario. The argument rests on the investment representing a swift way for Stripe to access the Africa corridor while benefiting from synergies accruing to the similarity of the products of both companies.

However, CVC investments as pure financial plays are rare. Given Stripe’s investment into Paystack also stretches beyond pure financial play to strategic expansion. Exceptions where we see pure financial plays only exist in cases where the investing company has spun off the investing function. Here, the benefits reaped are, at best, loosely connected to the corporate strategy but it can be rewarding from a financial standpoint. What is observed mostly in CVC are corporates strategically looking to extract value from the assets of the investee, with financial gain as a mere addition. 

While many corporates may want to set up their own CVC arms and pursue direct investment, this requires a significant change in the company’s structure to build talent, expertise, and relationships in order to generate deal flow as well as present the CVC as a credible investor in the eyes of entrepreneurs and other investors. Instead, as a better alternative, corporates should collaborate with established VCs.

In 2018, Standard Bank and Netcare partnered with UK startup accelerator and venture studio, Founders Factory, to set up Founders Factory Africa. Last year international logistics industry player Imperial also partnered with South African venture capital firm Newtown Partners to launch Imperial Venture Fund, a CVC focused on investing in startups in the logistics industry, with an initial investment of $20 million. 

Through such partnerships, the corporates are able to leverage the expertise of experienced VCs without internally altering their operational structure or setting up a new unit. More importantly, corporates still maintain direct access to the companies that their investment partners invest in which they can exploit for strategic purposes. For example, when Imperial Venture Fund made an investment in Kenyan logistics startup Lori Systems, Mohammed Akoojee, the Group CEO of Imperial, noted that the investment would “enable the creation of further business opportunities in Africa and provide efficiency for Imperial’s clients and transport operators with whom we collaborate.”

In order to support those that are looking to invest in African startups, Future Africa is collaborating with Africa’s leading corporates, helping them set up corporate venture arms to strategically invest in Africa’s mission-driven startups and gain access to new and innovative technologies to establish a competitive advantage.

Peter Kisadha is the Research Associate at Future Africa, a venture platform providing capital, coaching, and community to innovators who are turning Africa’s biggest problems into global business opportunities. Future Africa has worked closely with over 280 co-investors globally to deploy $4.5 million to 48 of the continent’s fastest-growing companies and returned a total of US $20 million, with distributions along the way. Interested in working with us to fund startups or create your corporate fund? Please email

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Key Highlights So Far

CVC activity in Africa fades in comparison to the rest of the world, but there are growing initial steps being taken by some corporates. 

In 2018, the French mobile network operator, Orange Group launched its CVC arm, Orange Digital Ventures Africa, a €50 million African corporate venture fund. Recently, the company spun it off as a separate legal entity renamed as Orange Ventures with €350 million. Today, Orange Ventures has investments in African startups including Kenya’s Africa’s Talking, South Africa’s Yoco, Gebeya from Ethiopia, and Youverify from Nigeria.

MTN Group joined Germany startup builder Rocket Internet, and Millicom to set up Africa Internet Holding which later became Jumia Group in 2013. While French insurance giant AXA invested €75-million to take an 8% stake in Jumia Group in 2016. This year, AXA CIMA collaborated with Orange to acquire DabaDoc after previously making investments into the startup. In 2019, Allianz X, the digital investment unit of the Allianz Group, co-led an investment in SafeBoda, a Ugandan bike-hailing startup. The investment was made alongside Go-Ventures, the venture fund whose cornerstone investor is the Indonesian startup Gojek.

South Africa’s Naspers has also consistently been active in CVC. Most known for its $32 million into China's Tencent in 2001, Naspers has looked to replicate the success by betting on startups in Africa and beyond. The company was among the earliest investors in e-commerce with investments in Konga from Nigeria as well as South Africa’s Takealot. But, it was the launch of Naspers Foundry, a US $100 million South Africa-focused VC fund, in 2019 that signalled its commitment. Since its inception, Naspers Foundry has invested in four South African startups; SweepSouth, Aerobotics, Food Supply Network, and The Student Hub.

In 2018, Commercial International Bank, Egypt’s biggest private bank, set up CVentures, a CVC to invest in fintech startups in the Middle East and Africa. Kenya’s Chandaria Capital is the investment arm of Chandaria Group, one of the largest and most diversified privately-owned groups in East and Central Africa. Chandaria Capital’s portfolio includes Bamboo, TradeDepot, Ilara Health, Kobo360, Sokowatch, and Carry1st.

South Africa is the bright spot

The country’s CVC activity can be traced to the beginning of the century when Naspers made a US $32 million bet on Tencent in 2001, a then little-known three-year-old Chinese technology company. Although Naspers has, over the years sold off part of that stake, their ownership in Tencent is currently worth over $200 billion. Around the same time, Nedbank participated in a US $21.7 million investment round into Gift Certificates. In 2007, it also invested in Convio’s US $10 million Series E

However, much of this initial CVC activity centred around South African companies looking outwards to Asia and North America. It wasn’t until the 2010s that the focus shifted to Africa. Once again, it was Naspers that led the charge by betting on the rise of e-commerce after it failed to gain traction with its own internally launched ventures including Kalahari. Among the investments, Naspers made were in Nigeria’s Konga and South Africa’s Takealot. Naspers ended up acquiring Takealot

Another South African company, MTN Group, through a joint venture with Germany startup builder, Rocket Internet, and Millicom, in 2013 launched Africa Internet Holdings (now Jumia Group) with several digital plays stretching from job and property listings to e-commerce and ride-hailing. MTN Group followed up with other strategic investments including Travelstart in 2016. The MNO has since exited most of its investments including Jumia and Travelstart. Estimates indicate that MTN made at least $160 million gain on its Jumia investments

Over the past few years, Nedbank has also invested through the $7.5 million VC fund it launched in 2018. Nedbank has invested in WhereIsMyTransport, Aerobotics, Snapt, and Omnisient. 

In 2019, Standard Bank led a US $4 million investment round into South African fintech Nomanini. A year earlier, the South African bank partnered with Founders Factory to establish Founders Factory Africa. Netcare, a South African private healthcare group, joined the partnership as a corporate investor targeting investments into 35 startups in the healthcare space. To date, Founders Factory Africa, on behalf of its two corporate investment partners has made over 20 startup investments


Safaricom, which dominates Kenya’s telecom industry (with an estimated 63.6% market share) and the Nairobi Securities Exchange, announced in 2020 the allocation of a further US $5 million to Safaricom Spark Fund to invest up to $500,000. Safaricom first launched the Spark Fund back in 2014 as a $1 million fund and invested an average of $175,000 in six Kenyan startups, namely; Sendy, Lynk, Ajua, Eneza, iProcure, and FarmDrive. 

Morocco-based healthtech startup, DabaDoc, received an investment round in April 2018 by the AXA Group. In June 2021, Orange and AXA CIMA announced a joint acquisition of a majority stake in DabaDoc. 

Carte, one of Tunisia's leading insurance companies, in 2019 invested $660,000 in, an online platform that allows users to find doctors closest to them and make appointments for free. A year earlier, Swiver, a Tunisian cloud accounting service provider, had also raised about $200,000 from Carte

In Egypt, Cairo-based home services marketplace FilKhedma raised their seed round from the country’s top VC Algebra Ventures as well as Glint Consulting, a management consulting firm. While digital lending platform Shahry raised $650,000 in pre-seed funding from Egyptian Gulf Holding for Financial Investments.

Last year, Dreevo, a last-mile delivery-focused startup, launched operations covering Egypt with a seed investment from EF logistics, a third-party logistic services provider. In 2021, EFG Hermes, an Egyptian financial services company, joined other investors to back YC alumni Dayra in the startup’s $3 million pre-seed round. EFG Hermes set up EFG EV, the fintech accelerator, with Egypt Ventures. EFG EV makes up to 10 startup investments per year.

Africa is also seeing a trend of startups investing in other startups. In Egypt, Fawry invested in Cairo-based B2C delivery startup Bosta in 2017. MFS Africa has turned to acquisitions and investments as a way to strengthen its network in East and West Africa with the aim to connect 500 million users by 2025. MFS Africa led a strategic $2.3 million seed round in Numida, a credit provider for small businesses in Uganda. It also made a $3 million investment for a minority stake in Cameroon’s fintech Maviance. MFS Africa also invested in the Series A round of Inclusivity Solutions. In 2020 it acquired Ugandan startup Beyonic