Zedcrest Capital, a firm known for its debt and equity capital markets investments but who has recently begun dabbling in venture investments, has launched a $10 million fund for African pre-Series A startups.
According to Zedcrest Capital, the “Knight Fund” is aimed at providing last-ditch follow-on capital access to local funding required to help startups consolidate on existing operations, growth, and expansion. “The Knight Fund was inspired by the current slowdown in startup funding for African founders as global investors retreat to focus on their core markets,” the organization said in a statement.
Top investors such as Tiger Global, SoftBank, and Sequoia Capital invested millions of dollars in African startups, particularly unicorns, last year, boosting the continent’s local ecosystem. This year, however, has been different. Despite receiving more VC investments in H1 2022 than in H1 2021 (an estimated $3 billion, according to several data trackers), the continent has yet to produce a single unicorn after eight months.
The talk in town is that African startups are feeling the pressure of the global market downturn and a slowdown in venture capital as international investors pull out term sheets and reduce the number of rounds previously earmarked for the region.
This event has influenced the certainty and speed with which African startups raise capital. Access to follow-on capital required to transition to the next growth phase is critical for early-stage startups that have raised – and spent – several million dollars in the last couple of years. Otherwise, they may cease to exist — for example, Kenya-based food startup Kune. Due to the current market conditions, startups such as Swvl, Vezeeta, and Wave have laid off employees.
