As DFI money dries up, AFC is doubling down on African VC with $100 million

For nearly two decades, Africa Finance Corporation (AFC) wrote cheques for bridges, ports, mines, and subsea cables. Now, the $19 billion Africa-focused development finance institution is doing something its own board initially resisted: betting $100 million on African venture capital.

Future Africa, the early-stage venture capital firm, and LightRock Africa, an impact investment firm, have received a combined $40 million anchor commitment from AFC, making them the first firms to raise capital from an unlikely backer of African venture capital. 

Begna Gebreyes, the head of AFC’s technology division, is leading this pivot into tech investing for one of the largest Africa-focused development financial institutions. 

Future Africa, the fund led by renowned tech founder and investor Iyin Aboyeji, is getting $15 million, and LightRock Africa will get $25 million as the first deployments from a $100 million fund the AFC has earmarked for African venture capital. 

While the AFC has previously backed African startups, it is the first time that the AFC is investing directly into an African tech venture capital firm, a pivot from writing cheques for bridges, ports, mines, and subsea cables. 

The investment comes as funding from development finance institutions (DFIs), historically the largest source of funding for African venture capital, fell to new lows in 2025, with only  27% of total commitments coming from DFIs. 

Africa-focused fund managers raised just $107 million across six final closes in 2025, an 87% year-on-year drop by value, according to the African Private Capital Association.

Established in 2007 and headquartered in Lagos, AFC has total assets of $19 billion. The DFI’s board, as Gebreyes recalls, initially pushed back on the idea of investing in African venture capital firms, telling him they sat on the board of an infrastructure developer, not a VC business.

But Gebreyes, an Ethiopian banker who joined AFC 12 years ago as a sector-agnostic private equity product specialist, helped convince them to reconsider their decision. 

Investing in tech stemmed from an observation Gebreyes and colleagues made around 2021: that what would actually make the continent competitive was digital services such as fintech, e-commerce, e-logistics, e-government, and e-health. 

Supporting those services would drive traffic onto the subsea cables AFC had financed and content into the data centres it was building. It would prime the pump for the infrastructure that the corporation’s traditional projects were designed to close, while bridging the same infrastructure gaps.

In our conversation, Gebreyes explained why AFC waited until now to back early-stage African VC, what AFC looks for in a VC fund manager, and how AFC could reshape how African startups are funded over the next decade.

This interview has been edited for length and clarity. 

What was the early limitation on how the AFC could participate in the technology sector?

The limitation we faced was the bank’s relatively low risk appetite compared to that of venture capital investors. That meant we were really only focused on very late-stage technology companies. We ended up doing co-investments with some physical equity and VC funds into M-KOPA, Moniepoint, and LulaLend. We did the working capital for Wave. We came close to doing a transaction with MNT-Halan.

These were all very well-developed companies. We were only touching the unicorns or the soon-to-be unicorns, companies that were already profitable and had critical mass. What we pointed out to our board and management was that we were not addressing the other 95%, maybe even 98%, of the venture capital ecosystem on the continent.

We convinced them that, rather than retooling our whole organisation to be able to address this segment, it made more sense to do the same thing lots of other DFIs are doing, which is using a mixed approach of a fund of funds to address the early stage and then making co-investments where appropriate into the best portfolio companies. Once those companies scale up and enter growth equity or debt fundraising rounds later, we will have already done our diligence on them and developed a direct relationship that puts us in a position to invest.

We have been doing the second half of that already — looking at late-stage companies. But we were not involved in getting to know those companies earlier. We have now launched this fund-of-funds programme with an initial envelope of $100 million to invest. We reached an agreement with the first two funds: LightRock Africa II and Future Africa Three. We are looking to close on both within the next month or two and fill the initial envelope with additional funds.

At the same time, as a multi-billion-dollar financial institution with extensive relationships in the business community and with the governments of our member countries, we are entering the institutional investor market – foundations, endowments, and pension funds – to crowd in co-investment. 

These are investors who cannot easily do small fund-by-fund investments in Africa because they do not feel they have the manpower or boots on the ground. We are telling them: come and invest alongside us in proportion with the $100 million commitment we have made. Our objective is to crowd in an additional $300 to $500 million of third-party capital to invest alongside our $100 million.

How did the conversations with the general partners of these firms begin?

When we first started investing in the VC space, we were looking to make direct investments, not through fund managers. The only companies that really met our criteria were the big multi-hundred-million-dollar valuation tech companies—MNT-Halan, Flutterwave, Moniepoint, and M-KOPA, to name a few.

Along the way, as we were talking directly with these companies about making direct investments, we started developing a rapport with a fund manager called LightRock, which was managing funds for LGT, the largest private family office based out of Liechtenstein, owned by the Prince of Liechtenstein and his family. We really liked the way they think and invest. It was no coincidence that their two lead partners both came from what was CDC Group, now British International Investment, and there was a connection in the past between our CIO and these two lead partners from past lives.

We teamed up with them and made three sidecar investments: one in M-KOPA, one in Moniepoint, and one in LulaLend. As they were getting ready to launch their second fund, we said we wanted to be an anchor investor. We worked with LGT and LightRock to develop a framework to position us as the anchor investor in the fund.

At the same time, we had been working with the team at Future Africa on developing a project called Itana, a digital services business free zone located in Alaro City, in Lekki. It is the first digital free zone in Nigeria, perhaps even in Africa. In our efforts to build a venture capital and academic ecosystem around it, we came to know the Future Africa team very well.

When we took the presentation for the LightRock anchor fund participation to our investment committee for consideration, it occurred to us that we should actually work with both LightRock and Future Africa. 

As we thought about it more, we realised we should be thinking bigger. When we finally went to our board, we chose a package that included not only LightRock Africa and Future Africa but also a larger envelope to seed a portfolio of venture capital funds in Africa.

From there, as we started describing our fund manager selection process and the economic and governance rights we have over these funds with US and European institutional investors, we realised there was an appetite among them to co-invest with us. 

We should make this a much bigger programme. That is really where we are ultimately trying to get. But it started deal by deal, what I refer to as hand-to-hand combat—by making direct investments, gaining comfort with the GPs we did sidecars with, and advancing project development on Itana. 

More recently, we have funded a much more structured process of inviting fund managers currently fundraising to make proposals to AFC, and we are conducting a vetting and screening process to select the additional funds to invest in.

What is the exact size of this investment vehicle?

We are starting with a $100 million envelope to invest. Our first two commitments are $25 million to LightRock and $15 million to Future Africa. The LightRock fund target size is $200 million, and the Future Africa fund target size is around $35 million.

The Future Africa strategy is mostly seed and pre-seed. The LightRock Africa fund strategy is more like Series B and beyond: growth capital. There is another $60 million of risk limit that we have been pre-approved to find additional fund manager commitments for.

AFC is typically known for infrastructure investments. Backing tech VC fund managers is a very different ball game, a meaningful departure from backing infrastructure or telco. Why now?

As investors in telecoms, we sometimes touch on digital services, particularly mobile money. Some of our mobile network operator clients were active in that space and were launching payment service banks, initially in Nigeria. When we looked at what creates the jobs, what creates the demand for data centre capacity, what creates traffic on the undersea cables and terrestrial fibre we are laying, it is these digital services. It makes sense to support them.

We also asked: how do we close the infrastructure gap in providing goods and services to Africa’s fast-growing future economy?

Again, it is through digital services. We have primarily focused on fintech, e-commerce, e-logistics, e-government, and e-health — the primary verticals within the VC space that we think will drive the next round of growth acceleration in our member countries.

Is this part of your existing $1 billion heavy industries, telecoms, and technology desk?

Yes. The HIT desk stands for heavy industries, telecoms, and technology. Right now, technology is the smallest component of the HIT portfolio;we are probably somewhere around $50 million. But once this new programme is deployed, it will cost us about $150 million. At the same time, we expect the HIT portfolio overall to increase to close to $2 billion. We are still looking at something less than 10% of the overall portfolio.

What were the criteria for picking the VC fund managers? What attracted you to LightRock and Future Africa?

It is a couple of things, and it is not so different from other people. One is, of course, track record. Do they have a track record of investing and harvesting investment returns? Do they have a history of adding value to the businesses they invest in?

We also look at the sectors they focus on. Are they closing infrastructure gaps that we see in access to goods and services and in job creation in our member countries?

The one slightly unique thing we look for, which not every other VC fund manager looks for, is twofold. First, all our VC fund managers must focus on either businesses based in Africa or on supporting ventures created by and employing Africans while providing those services abroad. In every instance, the question always comes back to our core mandate: how is this catalysing economic activity on the continent?

Second, are we acting as a catalyst? We look to be the largest and first LP commitment to the funds we back. We want to be an anchor investor, which comes with certain special economic and governance rights that other LPs would not be expected to have. We go in to catalyse those, because we are looking to crowd in investment. To the extent that a VC fund manager already has a long waiting list of LPs, as a DFI, we feel the market is already doing the job. We do not need to intervene. It is really with these high-potential, Africa-focused fund managers who may be struggling to secure that initial anchor investment that we want to step in.

Are there any geographic, sector, or stage constraints with this funding?

No stage constraints. We are looking at everything from seed through to Series E or so. The late stage is still the area where we can do direct investment. To the extent there is a stage constraint, it is more of a preference than a constraint: everything up to late-stage growth equity, because we can do that in-house. We are actually using investments in fund managers at earlier stages to act as a funnel for investments we would make off our own balance sheet.

In terms of geographies, as long as the fund manager’s focus is on Africa or on African entrepreneurs selling services abroad, we are open to all of the above.

How was the case made internally for such a high-reward, high-risk investment class like venture, especially given where AFC gets its money from?

This is one of the reasons it took us so long to reach a point where we were comfortable. The idea of doing something in the technology space started around 2020. When we first started, we were only doing direct investment in late-stage technology companies. There was a reluctance to invest in anything that was pre-profitability or pre-growth. A lot of that was around cautiousness and unwillingness to lose money.

We started cautiously and found that we were making good investment decisions and meeting fund managers who could pick winners, add value, and identify exit opportunities. When that happened, we decided we could create a small risk envelope for additional exposure in this space.

From a total balance sheet perspective, we have $19 billion in total assets. If you look at how much we are committing to this sector, you are talking about 50 basis points of the balance sheet. That is not to say $100 million is not dear to us. It is dear. It is sacrosanct. We do not believe in losing money. But the amount of risk exposure we are taking in this sector is still a small fraction – about half of 1% of our overall global total assets.

When you look at the development impact we can drive through this half of 1% of our total balance sheet, we think the returns on the development impact side will be substantially overweighted. Given our history in manager selection, market testing, and investment philosophy, we expect the actual investment returns will also be overweighted relative to the percentage of total assets we allocate.

Returns in Africa over the last five years have been hard to come by, with very few exits. Why is AFC entering now? What is your view on exit liquidity?

On the exit liquidity problem: it is true that the ability to exit in Africa relative to other markets is poor. There is less liquidity in the market, but it is not non-existent. You can look at just a handful of the transactions we have been in – whether they are Moniepoint, LulaLend, or M-KOPA. In each of those companies where we came in later, some earlier-stage investors were able to partially or fully exit.

In the winners, we are seeing this. MNT-Halan is another good example. TimeBank is another. If you are finding the right assets, there are fundraising rounds where exits are happening. It may not be an exit of the entire shareholder base; it may just be some portion of it. From our perspective, if you are still creating value, you are profitable enough to distribute capital as dividends or reinvest it for growth. Whether it is a partial exit or a subsequent round that increases the valuation of the overall business, you can still be making returns.

If you are not a fund, the real problem is for funds with finite lives – the fund manager has to close the fund and liquidate all assets by a certain date. If it does not, it may have two one-year extensions. That is where the problem arises: even though you are in a successful investment that is performing well and distributing dividends, it is somehow deemed that the lack of a complete exit is a failure.

Because we are a permanent capital investment vehicle—we are set up by treaty; we are not a corporation, but are similar to one —we have a permanent capital base, and we do not have the pressure to achieve an exit within a limited time and space. We do take exits, similar to any other investor, to maximise our IRR when they become available. Most recently, we did a partial exit of our Arise industrial platform.

We are not troubled by the possibility of holding an investment beyond a given fund’s life. From our perspective, if we can take some money out through a liquidity event—whether a recapitalisation or the entry of new investors—as long as value creation continues, we are very happy to remain involved in the company and grow it. 

That is ultimately why we are here, rather than just returning funds to a specific pool of investors within a specific period of time. Our mandate is to create value and grow companies. As long as the portfolio is doing that, we are achieving our mandate.