Seedstars launched its second emerging market seed stage fund, Seedstars International Ventures II.
The firm announced the first close of the fund with $20 million committed by notable investors including the International Finance Corporation (IFC), Visa Foundation, The Rockefeller Foundation, and Symbiotics.
Since 2013, Seedstars has supported over 90 emerging market venture ecosystems, seeing firsthand how the founder talent pool has matured with 2,070 VC-backed startups in 2021 in their core markets versus just over 560 in 2017 (Source: GPCA).
Seedstars will leverage this progress and invest in 100 pre-seed and seed stage companies across Asia, Africa, MENA, and LATAM in the next 3 years. Investments will be focused on companies building for the future of finance, commerce, health, work and education, with follow-on investments up to Series A.
The predecessor fund invested in 81 companies in over 30 countries, with category-leading investments in all regions including Dastgyr (Pakistan, backers include Veon and SOSV), Foodics (MENA, backers include Sequoia and Prosus), MyRobin (Indonesia, backers include Accion Venture Lab and Antler), OlaClick (LATAM, backers include Meta and Google/Gradient) and Omnibiz (Nigeria, backers include Musha Ventures and LoftyInc Capital), among others.
Charlie Graham-Brown, Seedstars Partner, comments, “I have no doubt about the abundance of talented founders or the market opportunities, but the challenges can’t be ignored. Our strategy innovates on so many levels to mitigate risk, be it through our country diversification, portfolio construction strategy, value creation platform, or the blended finance structure. We have a unique recipe, an incredible team, and backers in place to build on the success of the first fund and level the playing field for tech entrepreneurs around the world.”
Seedstars’ focus on supporting scalable technology companies in emerging markets, solving major societal challenges like access to finance, health, or education, and working closely with entrepreneurs to scale their businesses means that the impact thesis is embedded in the investment thesis. The fund also includes a blended finance component with a first-loss tranche that provides downside protection for investments in the lowest-income markets.
Seedstars Partner Patricia Sosrodjojo comments, “Investing and impact don’t have to be mutually exclusive. Our strategy combines these two critical objectives in one and we believe that is what both founders and investors are searching for.”
Value Creation
Venture capital flows in emerging markets have been growing at a 40% rate year-on-year, yet remain just 4% of global volumes. However, cash is only one of the ingredients for venture success and Seedstars distinguishes itself through its Value Creation Platform, built to help portfolio companies scale up rapidly.
The primary component of the Value Creation Platform is the Growth Track, a 3-month mentor-led sprint, where portfolio companies are equipped with the tools and methodologies to run a professional growth team.
The Growth Track is led by the fund’s Growth Entrepreneur in Residence, Jon Attwell (ex-Naspers/Prosus) with support from growth practitioners with experience in high-growth firms (e.g. Careem, SkyScanner). The Value Creation Platform also provides companies with access to a vast network of 1,300 mentors, support with fundraising, a group of peers, and various other benefits.
“Seedstars is a true outlier and they have proved that ever since they invested in our pre-seed round”, Co-founder & CEO of Dastgyr Zohaib Ali shared, “On fundraising, they were the most well-connected investors and helped us close the region’s largest Series A. On growth, they manufactured with us an organic ordering system which made Dastgyr a cost-effective B2B marketplace.”
Gender Equity
Women in VC represent just 23%, and only 11% of enterprises that attain seed funding in emerging markets are women-led. Gender equity has been a core focus for Seedstars. The team is 50:50 gender balanced at all levels and the first fund has 26% female co-founded businesses. Seedstars is on track to meet the 2X Challenge and aims to reduce bias through its data-driven selection process with further plans to implement diversity and inclusion training for portfolio companies.
Long Term Partners
The fund is co-anchored by four exceptional partners with significant emerging markets impact, and venture capital experience including the International Finance Corporation (IFC), Visa Foundation, The Rockefeller Foundation and Symbiotics.
IFC, a member of the World Bank Group, the largest global development institution focused on the private sector in emerging markets, co-anchored the fund. In fiscal year 2021, IFC committed a record $31.5 billion to private companies and financial institutions in developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity as economies grapple with the impacts of the COVID-19 pandemic.
Aligned with its goal to support inclusive economies where individuals, businesses, and communities can thrive, Visa Foundation has contributed to the Seedstars fund. Najada Kumbuli, Head of Investments, shares, “Visa Foundation is proud to partner with Seedstars as they provide capital and technical assistance to businesses at the catalytic stage of their journeys.”
The Rockefeller Foundation’s commitment came through the Zero Gap Fund (ZGF), an impact fund launched in partnership with the John D. and Catherine T. MacArthur Foundation and its flagship Catalytic Capital Consortium (C3). ZGF deploys patient capital into promising, impact-driven financial strategies and mechanisms that seek to catalyze large-scale private investment in advancing the UN Sustainable Development Goals (SDGs) to address the world’s biggest challenges.
Finally, the fund is supported by Symbiotics, the leading market access platform for impact investing, dedicated to private markets in emerging and frontier economies. Since 2005, Symbiotics has originated over 6,600 investments representing more than $6.9 billion for 524 companies in 93 countries.
In addition to the four co-anchors, the fund is backed by a number of serial entrepreneurs, angel investors and family offices bringing significant tech and emerging market knowhow to the consortium.
What’s next
Seedstars is also set to formally debut Seedstars Capital, a fund platform for multiple regional and thematic funds. The platform’s first strategies include Seedstars International Ventures and Seedstars Africa Ventures with more funds set to be announced shortly.
Seedstars welcomes seed stage technology companies in emerging and frontier markets to contact them.
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