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VC Spotlight: Constant Ventures looks to deploy USD 100m West Africa focused fund in five years

Mergermarket

Constant Ventures, a Lagos, Nigeria-based VC firm, is looking to fully deploy its USD 100m fund within five years, founder and Managing Partner Ike Echeruo told Mergermarket.

The firm has engaged advisers on several levels to assist with the fundraising process, and is also ready to work with other advisers representing potential investors, Echeruo said.

The firm has initiated conversations with potential investors, receiving “very strong indications of interest”, and expects to reach a closing within six to 12 months from now, he said, noting that the targeted investors include development financial institutions (DFIs), global institutional investors and family offices.

The fund has a ten-year lifecycle and will invest in pre-seed, seed and Series A financing rounds by financial services, marketplace and platform start-ups, Echeruo said. It has “a strong pipeline” of deals, he said, and will deploy funds immediately after the fundraising.

To date, Constant Ventures has made nine investments in Nigeria worth a total of USD 3.4m, and will continue to invest while raising the fund’s capital, he noted.

Echeruo and his brother Chinedu Echeruo are the fund’s general partners and investors, he said. They are also the founders of Constant Capital, an investment bank which has arranged morethan USD 3bn in transactions across West Africa to date, according to a presentation shared with this news service.

Constant Ventures will also participate in portfolio companies’ follow-on rounds, Echeruo said.

The new fund will invest in around 76 companies across West Africa, primarily in Nigeria and Ghana. This includes five investments in Series A rounds, each with an average ticket of USD 15m.

Two of the portfolio companies will execute “key expansion capital raises” in the next three to six months, which Constant Ventures is “well positioned” to lead, according to the presentation.

One of the planned investments is the upcoming financing round of Appzone, which offers a blockchain-powered, decentralised interbank payment network, Echeruo said, declining to elaborate.

In April 2021, Appzone raised a USD 10m Series A round led by local VC firm Cardinal Stone Capital.

The fund’s exits are expected through trade sale, IPOs or private market transactions, Echeruo said.

Constant Ventures charges 2% management fees and investors can expect a 5-10x return on their investments, per the presentation.

Financial services start-ups include companies building products or infrastructure that extends access to credit, savings and investments or digital payment products to previously underserved populations. Platforms and marketplaces are companies operating in large, fragmented value chains, which are aggregating suppliers/sellers and matching them with demand/buyers, as well as providing access to financial services, also according to the presentation.

Five years ago, African startups pulled in about $420 million in investment from venture capitalists, according to PitchBook data. That number increased to more than $2.2 billion in 2021, a record-setting year for deal value and deal count for the continent

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