Source: Tage Kene-Okafor/ TechCrunch
Enza Capital, a venture capital firm that backs startups “organizing the offline online” and “digitizing key African industries,” has closed $58 million across two funds.
In 2019, the company launched an early-stage fund to “find, back, and help build category-defining startups” in the pre-seed and seed stages. The fund is still active and has invested in fintech, logistics, health, human capital and climate tech companies. Enza Capital, which now self-describes as a multi-stage investor due to its larger follow-on investments to Series B, is still focused on these industries in its second fund launched this year.
Mike Mompi, co-founder and managing partner of Enza Capital, stated in an interview with TechCrunch that the firm made 48 investments in 31 companies from both funds. These investments span 8 African markets, including Kenya, Uganda, Nigeria, Ghana, Ivory Coast, Senegal, Egypt and South Africa.
The Nairobi-based VC firm, from its pilot fund, invested in Guidewheel, a Kenyan climate tech startup that has since expanded to the U.S. and Mexico following a Greycroft-led Series A round. Shara, a Kenyan fintech, is another. Enza Capital provided a pre-seed check to the company before it raised a yet-to-be-announced Series A round led by Index Ventures. The four-year-old firm also co-led a Series A investment in Ivorian fintech Djamo and Kenyan insurtech Turaco from its second fund.
Enza Capital’s typical check size in its portfolio companies, including Autochek, Jumba, Craydel, Cloudline and SeamlessHR, ranges from $250,000 to $5 million, Mompi said on the call. They also have the opportunity to access more follow-on investments from Enza Growth Capital, an evergreen, later-stage investment vehicle the firm launched last year to invest up to $20 million per company, according to its website.
“We have sufficient capital to write meaningful checks. Sometimes, we’re going in early and also follow-on in our companies. Then we have the growth fund, which is mostly a later-stage vehicle, where we can invest at any stage and co-invest with the core funds in existing portfolio companies, thereby staying with our companies for a long time,” said the managing partner, describing how Enza Capital’s investment vehicles function.
Pioneering a unique type of founder partner program
Enza Capital has an office in Nairobi; its eight-person team is dispersed across the city, Johannesburg, London and New York. Mompi stated that the firm might open offices in Lagos and a Francophone African city to support its portfolio companies in those markets. As a result, the company will employ more talent to work closely with these ventures across various departments. Until now, Enza Capital has provided value in the technical department, where its CTO-in-Residence assists startups’ engineering and tech teams pre- and post-investment.
Meanwhile, in a seemingly altruistic fashion, Enza Capital is launching its founder partner program, where founders and leadership teams of its portfolio companies become co-owners of the firm.
Enza Capital says the program is one way of cementing trust and belief with founders while committing to building long-term and mutually beneficial partnerships above and beyond traditional venture capital structures. For this reason, it is taking 10% of its carry pool and allocating it back to the founders. On the call, Mompi stated that several factors, including referrals to other businesses and the size of first check and follow-on investments, will determine how this carry is distributed among founders.
From the outside in, this model implies that the venture capital firm is giving away free equity or money. But Mompi and his general partner colleague John Lazar disagree. They have their reasons, which can be summed up as aiming for better alignment with founders and being empathetic toward them.
“The founder partner program fosters alignment and collaboration,” said Lazar. “And it increases the likelihood of success across all stakeholders in the venture capital structure, ranging from LPs and investors to management teams, and extending to the ultimate beneficiaries of the products or services developed by these enterprises. We truly believe in shared ownership, and we can empathize with leadership teams.”
Mompi reiterates Lazar’s point. He said both partners have experienced the arduous process of raising venture capital and scaling a company (Lazar, for example, was the CEO of Metaswitch Networks, a Francisco Partners- and Sequoia-backed cloud communications company that he helped grow to over $100 million in annual revenue before its acquisition by Microsoft. Mompi, on the other hand, co-founded and built the early-stage investment business at ClearlySo, an impact investment bank backed by Octopus Ventures.) As such, unlike some investors whose sole focus is to get outsized returns and fund-returning champions, Enza Capital also wants to leave something on the table for founders who don’t succeed, given that 90% of startups fail.
“The only way we want to win is if our founders win. For us, this isn’t a way of just commenting on that but doing it,” said the general partner, who hopes this shared ownership model becomes the norm in African venture capital investing.
Following the same line of thought about setting a precedent, Mompi estimates that Enza Capital is one of the continent’s largest funds that isn’t backed by typical African institutional investors, such as DFIs. The managing partner says that he hopes to see future funds with DFIs and other traditional African LPs, as well as participation from more global endowments, foundations, and pension funds as the African ecosystem matures; however, the fact that they didn’t raise money from them for this fund shows that venture capital in Africa is becoming more mainstream.
The limited partners across Enza’s funds include the founding partners and a diverse group of investors, from private individuals, family offices and foundations to fund of funds, hedge funds and venture capital funds.
Source: Tage Kene-Okafor/ TechCrunch
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