The company in Casablanca aims to tackle the lack of investment available for businesses in the growth stage by using funds from within the local area.
Al Mada Holding Group stands out as one of the biggest private investment funds in Africa. Based in Casablanca, this private holding company is involved in various areas like banking, telecommunications, renewable energy, and the food industry, making a significant impact in these diverse fields.
Throughout the years, Al Mada has focused on getting the majority ownership of many big private companies in Morocco. They have a portfolio that covers 27 markets, with 25 of them in Africa. To stay important, the company has thought about how to make these businesses grow and be more innovative. They also want to expand their market share in the various fields they’re involved in and stay ahead in new and game-changing technologies that might come up soon.
While dealing with these important questions, Al Mada carefully watched the impressive expansion of the venture capital asset class. Just to give you an idea, back in 2016, the money invested in African startups was $366 million. Fast forward to 2022, and this figure has soared to a whopping $5-6 billion in both equity and debt deals.
When we look at how money is invested, we notice three consistent patterns. At the beginning, smaller local investors usually take the lead, investing in early-stage projects. This is big in terms of the number of investments. On the other hand, the news often talks about late-stage investments from foreign investors because they involve a lot of money. However, there’s a lack of funds when it comes to Series A and B stages. These are phases where Africa-focused funds, often supported by development financial institutions (DFIs), play a significant role.
Exploring the world of capital venture
In March of last year, Al Mada noticed certain things and decided to create a separate venture capital firm called Al Mada Ventures (AMV). They set aside $110 million (about 1.1 billion dirhams) for this. Al Mada’s big idea was to start a firm focused on Africa to help businesses in their growth stage. The interesting part is, that they’re using money only from Africa, not from international investors or development financial institutions (DFIs).
Besides the anchor, the evergreen fund’s partners include top-notch corporate and institutional investors from the continent, as shared by managing director Omar Laalej in a conversation with TechCrunch. Before leading the Moroccan venture entity, Laalej co-founded the Cathay AfricInvest Innovation Fund (CAIF), a $100 million pan-African VC fund established through a collaboration between AfricInvest Group and Cathay Innovation, a European-based VC firm. Other key members of the team include Yassine Soual (Investments), Narjisse Belmahi (CFO/COO), and Rida Chahoud (Value Creation).
Omar Laalej (managing director, Al Mada Ventures)
Africa has just a few venture capital funds that stay active over the long term. Laalej, from AMV, says they went with this strategy to tackle some challenges in Africa’s venture scene. One big issue is the lack of patient capital – money that’s willing to stick around through the ups and downs of the tech world. Often, these ups and downs don’t match what’s happening on the ground for African startups, companies, and innovators.
Africa isn’t alone in facing over a 50% drop in venture capital funding compared to last year. However, unlike other growing markets in Latin America, India, Southeast Asia, and the Middle East, Africa heavily relies on foreign money to develop its tech scene. Last year, a significant 77% of the investors supporting African startups were from outside the continent, highlighting the dependence on international capital for growth.
The situation becomes more complex because many local companies, pension funds, big international companies, and investment firms are hesitant to set aside some of their money and resources for venture capital. Al Mada, with its venture branch, aims to shift this perspective. If they successfully support successful ventures that bring in significant returns and have a positive impact locally and globally, other traditional institutions might also start doing the same. Examples like Orange Ventures Africa and Helios Digital Ventures show how some companies and private equity firms are creating venture arms.
Investment theory of an evergreen fund
Having received corporate venture capital, AMV aims to solve the communication gap between big companies and startups. Usually, when they see issues in various markets, they see them from different perspectives and don’t always agree on how to solve them. AMV wants to fix this by linking its startups with some of Al Mada’s subsidiaries, encouraging teamwork in both groups.
Laalej explained how teaming up a user-friendly tool from a startup with the risk assessment skills of a big insurance company can work wonders. In places like sub-Saharan Africa, where only about 3% of people have insurance, this partnership can do some real magic. With more people going digital and realizing the importance of being financially included, combining the resources of big companies with the fresh ideas and ability to bring together lots of people from startups can be a win-win, creating value for everyone involved.
Susu, a startup based in France and Ivory Coast, focuses on offering support services for people dealing with diabetes and hypertension in French-speaking parts of Africa. This company, which is part of AMV’s investment portfolio, recently received substantial funding in a $4.9 million seed round led by AMV. Additionally, AMV has supported a health tech startup in Morocco, a Dutch company managing a hotel booking platform used by customers in Africa, and is currently discussing potential investment in an Egyptian fintech company.
Laalej points out that the company in Casablanca doesn’t limit itself to specific industries, but it strategically aims to benefit from the expertise of Al Mada and other Limited Partners (LPs). These expertise areas include finance, health, logistics, renewable energy, mining, distribution, retail, education, and telecom. AMV looks for innovative ideas that match and enhance these established sectors, connecting products and expanding their reach both in terms of the product itself and the areas they cover.
“We’re very strong in North Africa, Francophone-speaking West Africa and Central Africa and want to capitalize on our network in those regions. We want to help startup founders scale their products and services into regions where we strongly understand the local environments across different topics, from regulatory frameworks and go-to-market strategies to unit economics and benchmarking,” Laalej explained. “Then, we will also create bridges with other regions where we’re not necessarily as present but want to build our presence in markets like East Africa and southern Africa or even Anglophone West Africa.”
From Early Seeds to Growing Opportunities
This approach isn’t limited to African startups; it includes foreign companies operating in Africa, whether they are in the early stages or have already received funding from AMV. For instance, there’s a Netherlands-based hospitality startup in their portfolio. Worth mentioning is that the three startups in AMV’s portfolio are currently in the seed and Series A stages, a shift from their initial focus on filling the gap in growth-stage funding. This is where other funds like TLCom Capital, Partech Africa, Norrsken22, Algebra Ventures, and CAIF usually operate.
Laalej explains that AMV observed a lack of high-quality Series A and B startups after their fundraising efforts. This is because many startups took advantage of the plentiful funding available, especially from 2020 to 2021. As a result, these startups secured enough funding to sustain their operations for 18 to 24 months. Consequently, these well-prepared startups haven’t felt the urgent need to seek more funding in the current market conditions.
“While we were fully aware of this as we were closing the fund, we decided that we were going to try to source our deal flow of Series A and Series B by taking an earlier approach,” Laalej explained. “We now want to invest in some of the most mature seed startups that we could identify in the market and be a bit proactive about doubling down on the ones that we think will be able to go to markets and raise a Series A round and that’s what we’ve done.”
