New York-based venture 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 final close in the first quarter of next year.
The spin-off continues Modus’ series of moves over the past 18 months, which has seen it add branches in Abu Dhabi, Cairo and, most recently, Riyadh, with support from institutions such as Mubadala’s Hub71. Modus says its entry into Africa creates an “additional pipeline of market access for Modus portfolio companies while also allowing new African companies to scale in the MENA region.”
As a “comprehensive entrepreneurship platform,” Modus manages three business units that focus on entrepreneurs and startups in the MENA and GCC regions. They include the Venture Builder, who works with ideas and early stage MVP stage companies. Then there’s Corporate Innovation, a service platform that leverages internal company knowledge to support corporations and government entities. And its Venture Capital arm provides investment to start-up and mid-size startups, like the Ogram staffing platform.
On his website, Modus says his fund is backed by a number of investors ranging from UHNWIs, family offices, private investors, and US, EU, and MENA government-backed entities.
Although Modus invests primarily in foreign-based companies that are “portable to the Middle East” as well as start-ups in Egypt and the GCC, its expansion into sub-Saharan Africa is not surprising. Last year, African startups raised more than $5 billion and minted five unicorns (according to this report, the continent saw 250% year-on-year growth in funding and exceeded capital deployed in MENA). And despite current macroeconomic trends and conditions that have resulted in layoffs, roundups and closures, startups on the continent are poised to surpass last year’s record fundraising numbers.
Unlike other markedly funded companies interested in Africa, Modus’ interest in AI and blockchain technologies is intriguing. Although it has household names like Tunisia’s InstaDeep, Kenya’s Sama, and South Africa’s DataProphet, and several web3 startups claiming to build on blockchain, Africa’s blockchain and AI sectors are still relatively nascent. The thinking behind the adoption of this strategy can be traced back to Vianney Mathonnet and Andre Jr. Ayotte, the general partners of Modus’ Africa-focused fund. Both partners, in an interview with TechCrunch, described how various stints working in banking, finance and family offices based in Dubai pointed to the rise of blockchain technology and its huge opportunity and application in Africa.
“Not long after we launched this project after noticing how massive blockchain and AI could be in Africa, Modus Capital approached us because they wanted a pan-African strategy,” Ayotte said. “They were looking for people with the knowledge, the network, the experience to do that, so we started discussing how the partnership would work. In the end, what happened is that our project became the Modus Africa fund.”
According to a statement, Modus says that Africa has the potential to reach more than 200 million new blockchain users in the next four years, driven by necessity and a rapidly growing tech-savvy population. However, the six-year-old venture capital firm isn’t just taking a chance on purely AI and blockchain startups; instead, it’s cutting checks at startups in broader industries that are implementing those technologies into their products. The firm is currently closing three investments in startups using AI and blockchain in insurtech, fintech and healthcare technology, said the general partners who control the fund’s thesis, direction and investment strategy while leveraging the team of more of 50 from Modus to carry out due diligence and portfolio management.
Mathonnet said the “jurisdiction-agnostic” Modus Africa will invest in around 45 early-stage startups and allocate 50% of the $75 million SDG-focused fund for follow-on investments, especially in Series A rounds. These checks will range between $350,000 and $1.2 million in both stages.
“We as a fund will reinvest in our winners and our LPs are also looking 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 really strong in tech ecosystems like Kenya and Nigeria, Egypt and South Africa, and it’s inevitable there will be a lot of flow within all of these regions. However, with that being said, we are exploring new regions and looking for key partnerships to enter those markets and add some support and sustainability to the business pipeline.” Some of these markets include the Democratic Republic of the Congo (DRC), Niger, and others in French-speaking Africa.
Speaking about the formation of Modus Africa, Kareem Elsirafy, Modus Managing Partner, said in a statement: “Modus is proud to launch an Africa-MENA investment corridor to continue supporting and investing 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 excited to have Vianney and Andre lead the way on this journey.”