Modus expands into sub-Saharan Africa with the launch of its $75 million AI and blockchain-focused fund • TechCrunch
New York-based venture platform Modus has launched Modus Africa, a venture capital fund for AI and blockchain startups across sub-Saharan Africa, TechCrunch has learned. The fund is expected to close in the first quarter of next year.
The spinoff continues Modus’ string of moves over the past 18 months, which have seen it add branches in Abu Dhabi, Cairo and, most recently, Riyadh, backed by institutions such as Mubadala’s Hub71. Modus says its entry into Africa creates an “additional channel of market access for Modus portfolio companies, while enabling African startups to scale into the MENA region.”
As a “holistic venture platform”, Modus operates three business units focused on entrepreneurs and startups in the MENA and GCC regions. They include Venture Builder, which works with ideas and early stage MVP stage companies. Then there is Corporate Innovation, a service platform that leverages the firm’s internal knowledge to support companies and public entities. And the Venture Capital arm provides investments to early and medium-sized startups, such as the staffing platform Ogram.
On its website, Modus says that the fund is supported by several investors, ranging from UHNWIs, family offices, private investors and government-backed entities from the US, EU and MENA.
Although Modus primarily invests in foreign-based companies that are “portable to the Middle East”, as well as startups in Egypt and the GCC, the expansion into sub-Saharan Africa is not surprising. Last year, African startups raised over $5 billion and minted five unicorns (according to this report, the continent observed a 250% year-on-year growth in funding and outpaced the capital deployed in MENA). And despite today’s macroeconomic trends and conditions that have resulted in layoffs, downsizing and closures, startups on the continent are set to top last year’s fundraising record.
Unlike other firms with significant funds interested in Africa, Modus’ interest in AI and blockchain technologies is exciting. Although it has household names such as Tunisia’s InstaDeep, Kenya’s Sama and South Africa’s DataProphet – and several web3 startups that claim to build on blockchain – Africa’s AI and blockchain sectors are still relatively nascent. The thinking behind adopting this strategy can be traced to Vianney Mathonnet and Andre Jr. Ayotte, the general partners of Modus’ Africa-focused fund. Both partners, in an interview with TechCrunch, described how several stints working in banking, finance and Dubai-based family offices pointed them to the rise of blockchain technology and its great potential and application in Africa.
“Not long after we launched this project after noticing how massive blockchain and AI could be in Africa, we were approached by Modus Capital because they wanted a pan-African strategy themselves,” Ayotte said. “They were looking for people with the knowledge, the networks, the experience to do that, so we started discussing how the partnership would work. Ultimately, what happened is that our project became the Modus Africa Fund.”
LR: Andre Jr. Ayotte and Vianney Mathonnet (General Partners, Modus Africa)
According to a statement, Modus says Africa has the potential to reach 200 million+ new blockchain users over the next four years, driven by necessity and a rapidly growing tech-savvy population. Still, the six-year-old VC firm isn’t just taking a chance on pure AI and blockchain startups; instead, it cuts checks into startups across broader sectors that implement these technologies into their products. The firm is currently closing three investments in startups using AI and blockchain across insurtech, fintech and health technology, said the general partners who control the fund’s thesis, direction and investment strategy while leveraging Modus’ 50+ team to perform due diligence and portfolio management .
Mathonnet said the “jurisdiction-agnostic” Modus Africa will invest in about 45 seed-stage startups and allocate 50% of the $75 million SDG-focused fund to follow-on investments, particularly in Series A rounds. These checks will range from $350,000 to $1.2 million across both stages.
“We as a fund want to reinvest in our winners and our LPs also want to reinvest in them outside the fund, catalyzing even more money in the ecosystem in Africa,” the partners said. “In terms of countries, we know that tech talent and incubators are very strong in tech ecosystems like Kenya and Nigeria, Egypt and South Africa, and it’s inevitable that a good amount flows within all of these regions. That said, exploring however, we are new regions and looking for key partnerships to enter these markets and add some support and sustainability to the deal flow.” Some of these markets include the Democratic Republic of the Congo (DRC), Niger and others in Francophone Africa.
Speaking about the formation of Modus Africa, Kareem Elsirafy, managing partner of Modus, said in a statement: “Modus is proud to launch an Africa-MENA Investment Corridor to continue to support and invest 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 delighted to have Vianney and Andre leading the way on this journey.”
