Pan-African contrarian investor P1 Ventures reaches $25M first close for its second fund

Pan-African venture capital firm P1 Ventures has reached the first close of its second fund at $25 million. The venture capital firm secured this capital from some of Africa’s largest industrial conglomerates and private companies, several fund of funds and general partners of global funds based in the U.S. and Europe.

P1 Ventures expects to reach a final close by early next year, founder and general partner Mikael Hajjar told TechCrunch in an interview.

Hajjar launched P1 Ventures in 2020 with Hisham Halbouny, who also serves as a general partner. Its first fund (a proof of concept fund as Hajjar calls it) allocated $11 million to 24 ventures, primarily concentrating on e-commerce, fintech, insurtech, health tech, and SaaS industries.

While this second fund (its first institutional fund) will still focus on these sectors, the firm is adding AI to the mix. Its first investment in this category is Senegalese startup Nkoloso.ai, which gathers data and keeps track of vast tracts of agricultural land using satellite imagery and AI. It’s also one of five startups the San Francisco–based venture capital firm has backed from its second fund.

Hajjar argues that the use of AI by the firm in the agriculture and fast-moving consumer goods (FMCG) sectors exemplifies Africa’s potential to leverage this emerging technology to bypass traditional infrastructure, similar to the way mobile money in Africa surpassed the need for debit and credit card infra. Additionally, AI demonstrates how African companies may develop products with global reach.

“We believe that AI will be Africa’s next big leapfrog opportunity. So when you think how fintech transformed the continent and allowed it to disrupt the banking sector, we believe AI will do the same with sectors like retail, healthcare, and the creative economy,” said the general partner.

“What we see beautiful in AI is the ability to export. As you know, single market and currency risk are the main risks in investing in Africa. The beauty of AI is that you have export-first businesses.” Hajjar cited Egypt-born Instabug, a company he cut an angel check to, and BioNTech-subsidiary InstaDeep as examples of such African-founded software and AI businesses with customers in the U.S., Europe and globally.

P1 Ventures recently began an Entrepreneur In Residence program, under which Nkoloso.ai received funding. Both partners utilize their skills and expertise as past operators to manage this venture studio, which plans to incubate four more startups in the next four years headed by founders capable of achieving product-market fit and scaling the product.

During the interview, Hajjar proudly highlights his firm’s “contrarian” approach to (VC) investment in Africa. “We go off the beaten path and back the underdogs; we invest where no one else does,” he says, underscoring super early investments made from P1 Ventures’ first fund in startups operating within Francophone Africa markets, including Yassir, a mobility startup-turned-super app in Algeria; Chari, a B2B e-commerce platform in Morocco; and Djamo, a payments startup in the Ivory Coast. These upstarts have emerged as the most well-funded startups in their respective countries. Notably, Yassir, the firm’s first investment, stands out as one of the most valuable startups in Africa and the Middle East.

L-R: Hisham Halbouny and Mikael Hajjar.

Although most of P1 Ventures’ investments from its initial fund were made in the seed stage, the firm characterizes itself as multistage and occasionally engages in Series A and B investments opportunistically. It is evident that P1 Ventures likely provided small checks during subsequent stages of expansion for companies such as Yassir and Egyptian fintech MoneyFellows, owing to the limited size of its first capital. Nevertheless, it is intriguing that the firm was able to participate in these rounds. Hajjar explained that the partners’ institutional track record plays a significant factor. He also noted specific instances when stage and geographical arbitrage were crucial and emphasized their active involvement in assisting companies with investors for follow-on rounds, talent, and expansion strategy.

“Very few African GPs manage funds with that institutional track record and that allows us to have better visibility on what it takes to build category-defining businesses, especially as we look at inflection points and arbitrage across stages and geographies,” the general partner said, referencing how P1 Ventures picked Chari at the pre-seed stage rather than more popular B2B e-commerce deals in Egypt and Nigeria and MoneyFellows at Series A instead of other pre-seed/seed stage fintechs at comparable price points in Egypt.

On top of that, P1 Ventures was also instrumental in connecting MoneyFellows with CommerzVentures for its Series B round and Chari in several acquisitions it has made in the last two years, Hajjar remarked.

General Atlantic-backed Reliance Health and Gameball, an Egyptian software company gamifying loyalty and customer retention with a client base across 70 countries, are among P1 Ventures’ 29 early-stage investments in 10 countries since its launch.

P1 Ventures has observed that, on average, its portfolio businesses have secured 35 times more follow-on money for every dollar it has invested, even in the face of a decline in global venture capital funding. The firm, which didn’t disclose its IRR, asserts that the metric stems from the significant value it contributes to its portfolio firms beyond capital. This value is primarily attributed to the partners’ multistage, multisector expertise and extensive networks across the U.S., Europe, and Asia.

Before engaging in angel investing in 2014 and establishing P1 Ventures in 2021, Halbouny previously had a position as a partner at Man Capital, a subsidiary of Mansour Group. Man Capital had invested early in prominent companies such as Uber, Airbnb, and Bolt. He was also managing director at EFG Hermes, one of MENA’s largest investment banks. On the other hand, Hajjar, a Stanford MBA graduate and engineer, held roles in Google, Zum, and Areva, all of which are Fortune 500 companies.

“I’m the first Mauritanian to launch a fund; as you can appreciate, this comes with a deep sense of meaning. I know African talent is more dispersed than current VC is. I intend to be this change agent and empower the next generation of African entrepreneurs. Just like people took a chance on me as an emerging fund manager, it’s my duty now to back underdog founders and turn them into regional, if not global, winners,” Hajjar stated.

“Also, what Africa is going through right now, we believe, is very similar to what Europe went through 25 years ago or what Latin America went through eight years ago. We believe P1 is best positioned to emerge as the premier VC just like Index Ventures did in Europe or Kaszek in Latin America.”

Along with the partners, P1’s advisory group also consists of investors and operators, including Emil Michael, the former chief business officer of Uber, and Bernard Dalle, a former partner of London-based Index Ventures.

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