Image credits: Modus Capital
New York-based venture capital platform Modus has launched Modus Africa, a venture capital fund for AI and blockchain startups in sub-Saharan Africa, TechCrunch has learned. The fund is expected to reach its first close in the first quarter of next year.
This spin-off is a continuation of Modus’ initiatives over the past 18 months, which have seen it add branches in Abu Dhabi, Cairo and, more recently, Riyadh, supported by institutions such as the Mubadala Hub71. Modus says its entry into Africa creates an “additional conduit of market access for Modus portfolio companies while also enabling African startups to expand into the MENA region.”
As a “holistic venture capital platform”, Modus operates three business units focused on entrepreneurs and startups in the MENA and GCC regions. They include Venture Builder, which works with MVP ideas and early-stage companies. Then there’s Corporate Innovation, a services platform that leverages the company’s internal know-how to support businesses and government entities. And its Venture Capital arm provides investments to early-stage and mid-sized startups, such as recruiting platform Ogram.
On its website, Modus says its fund is backed by several investors ranging from UHNWIs, family offices, private investors and government-backed entities from the US, EU and MENA region.
Although Modus primarily invests in foreign “Middle East portable” companies, as well as startups in Egypt and GCC countries, its expansion into sub-Saharan Africa is not surprising. Last year, African startups raised over $5 billion and created five unicorns (according to this report). report, the continent saw 250% year-over-year growth in funding and outpaced capital deployed in the MENA region). And despite current macroeconomic trends and conditions that have led to layoffs, shutdowns and shutdowns, the continent’s startups are put on top last year’s record fundraising numbers.
Unlike other companies with funds marked and interested in Africa, Modus’ interest in AI and blockchain technologies is intriguing. Despite having household names such as Tunisia’s InstaDeep, Kenya’s Sama and South Africa’s DataProphet – and several Web3 startups claiming to build on blockchain – Africa’s AI and blockchain sectors are still relatively nascent. The thinking behind adopting this strategy can be attributed to Vianney Mathonnet And André Jr. Ayotte, the general partners of Modus’ Africa-focused fund. The two partners, in an interview with TechCrunch, described how several stints in banking, finance, and family offices based in Dubai led them to the emergence of blockchain technology and its outsized opportunities and applications in Africa.
“Soon after starting this project, after noticing how massive blockchain and AI could be in Africa, we were approached by Modus Capital because they wanted a pan-African strategy themselves,” said Ayotte. “They were looking for people with the know-how, network and experience to do this, so we started discussing how the partnership would work. Ultimately, what happened was that our project became the Modus Africa fund.
According to a statement, Modus says Africa has the potential to reach over 200 million new blockchain users in the next four years, fueled by necessity and a fast-growing, tech-savvy population. However, the six-year-old venture capital firm is not only taking a chance on purely AI and blockchain startups; instead, it reduces controls on startups in broader sectors that implement these technologies in their products. The company is currently closing three investments in startups using AI and blockchain in the insurance, fintech and healthcare sectors, said the general partners who control the thesis, direction and strategy of investment of the fund while leveraging Modus’ 50+ team to perform due diligence and portfolio management.
Mathonnet said Modus Africa, “independent of any jurisdiction,” will invest in around 45 seed-stage startups and allocate 50% of the $75 million SDG-focused fund for follow-on investments, particularly in seed-stage series A. These checks will vary between $350,000 and $1.2 million for the two stages.
“As a fund, we will reinvest in our winners and our LPs also seek to reinvest in them outside of the fund, catalyzing even more money into the ecosystem in Africa,” the partners said. “In terms of countries, we know that tech talent and incubators are very strong in tech ecosystems like Kenya, Nigeria, Egypt and South Africa, and it is inevitable that there will be a lot of deals flowing in all these regions. That said, we are exploring new regions and seeking key partnerships to penetrate these markets and add some support and sustainability to deal flow. Some of these markets include the Democratic Republic of Congo (DRC), Niger and others in French-speaking Africa.
Speaking on the creation of Modus Africa, Kareem Elsirafythe managing partner of Modus, said in a statement: “Modus is proud to launch an Africa-MENA Investment Corridor to continue to support and invest in emerging innovation ecosystems. The Modus platform is uniquely positioned to deliver impact and value to African communities through operational, institutional and financial capital. We are thrilled that Vianney and André are leading the way on this journey.