Modus, a New York-based venture platform has launched a venture capital fund for startups in the AI and blockchain category across sub-Saharan Africa. The new fund called Modus Africa is expected to reach its first close in the first quarter of 2023.
Modus Africa comes on the heels of additions in Abu Dhabi, Cairo, and Riyadh. Modus explained that entering Africa creates an “additional conduit of market access for Modus portfolio companies while also enabling African startups to scale into the MENA region.” The “holistic venture platform” operates three business units which all focus on startups and entrepreneurs in the MENA and GCC regions. The first called Venture Builder works with ideas and early-stage MVP stage companies. The second called Corporate Innovation is a service platform that supports corporations and government entities. The last, its Venture Capital arm, invests in early and mid-stage-sized startups.
According to information provided on its websites, some of Modus’ investors include UHNWI, family offices, private investors, and entities backed by their government from the US, the EU, and MENA.
Modus primarily invests in foreign-based companies that are “portable to the Middle East” and startups in Egypt and the GCC. Its sub-Saharan Africa expansion isn’t much of a surprise because Africa is one of the fastest-growing regions. Last year, the continent secured more than $5 billion in funding and five new unicorns from the continent were born. Irrespective of the macroeconomic headwinds that have rocked the globe, African startups are on track to exceed the amount they raised last year.
Africa’s AI and blockchain sectors are still in their infantile stages and Modus, via Modus Africa, may be looking to leverage the underlying opportunity. The rationale behind this strategic fund can be associated with Modus Africa general partners Vianney Mathonnet and Andre Jr. Ayotte, who described how working across banking, finance, and Dubai-based family offices brought them to the opportunities that will follow with the emergence and application of blockchain technology.
“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. They were looking for people with the know-how, network, and 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,” Andre Jr. Ayotte said.
Africa has the potential of reaching up to 200 million new blockchain users by 2026, according to a statement by Modus. This demand will be brought about by necessity and a fast-growing tech-savvy population. Modus will also be investing in broader sectors that are implementing AI and blockchain technology into their products.
Currently, Modus Africa is closing three investments in startups employing AI and blockchain across insuretech, fintech, and health tech, according to the general partners. According to Vianney Mathonnet, Modus Africa will invest in about 45 seed-stage startups and will allocate 50 percent of the $75 million for follow-on investment, especially in Series A rounds. Investments will be provided in the range of $350,000 to $1.2 million across both stages.
“We as a fund will reinvest in our winners and our LPs are also looking to reinvest in them outside the fund, catalyzing even more money in the ecosystem in Africa. 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 that a good deal flow within all these regions. With that said, though, we are exploring new regions and searching for key partnerships to enter those markets and add some support and sustainability for deal flow,” the general partners said.
“Modus is proud to be launching 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’re excited to have Vianney and Andre leading the way on this journey,” Kareem Elsirafy, the managing partner of Modus said while speaking on the launch of Modus Africa.