Since its launch nine years ago, Seedstars has invested in 81 companies in more than 30 emerging countries. Now, it has set itself the goal of investing in 100 more startups with the launch of its second emerging markets seed fund, called Seedstars International Ventures II (SIV), with an initial close of $20 million. The fund is expected to total $30 million and its limited partners include the International Finance Corporation (IFC), Visa Foundation, Rockefeller Foundation and Symbiotics. The company is to invest in pre-seed and seed startups in Asia, Africa, the Middle East and Latin America over the next three years, with follow-on investments up to Series A.
Some examples of Seedstars portfolio companies include Pakistani e-commerce startup Dastgyr; cloud-based POS and restaurant management system in Saudi Arabia Foodics; the Indonesian labor market MyRobin; Latin American restaurant CRM OlaClick; and the Nigerian B2B marketplace Omnibiz.
Patricia Sosrodjojo, partner at Seedstars, told TechCrunch that the second fund’s investment thesis is similar to that of its predecessor: to intervene at a very early stage, in emerging market tech ecosystems, and seek out startups that have the potential to have a broad impact.
“I think it’s three different levels,” she said. “The first is the fact that we come in very early, we are usually one of the first institutional checks after the angels so that we can help catalyze capital. The second is in the countries we cover, where the ecosystems are not still so developed. And the third is that we are looking for business models that can evolve quickly, similar to the normal VC model, but could affect a large number of people. We align with many ESGs.
One difference between the SIV II and the first fund is that it can issue larger checks. Initial checks will be between $150,000 and $250,000, with potential follow-on investments of $500,000. It will also have a narrower geographic focus. The first fund has invested in 30 countries, and the second fund will also have a global perspective, but will focus on one to three countries in each region.
Specifically, these are Indonesia, Vietnam and the Philippines in Southeast Asia (although Sosrodjojo said SIV II will look at other countries as well); Pakistan and Bangladesh in South Asia; Egypt in the MENA region; and Mexico in Latin America. His outlook on Africa will be more shared; it has already made investments in Kenya, Tanzania and Nigeria.
SIV II plans to follow on 25% of its portfolio.
“We’re really looking to diversify holdings, learning from one market to another,” Sosrodjojo said. “For example, if we invested in a B2B supply chain game in one country, we can take lessons from that and apply them to another geography. We find that different trends can appear at different times in different markets, so this helps us see the typical trajectory of a certain industry. »
The fund will focus on verticals including finance, trade, healthcare, labor and education. In particular, “financial inclusion is a challenge in many of these markets. This is something we will continue to focus on,” Sosrodjojo said.
One of the things that makes SIV II unique is that it has a blended finance structure with a facility provided by IFC, one of its LPs. As part of the fund’s mandate, it will invest up to 25% of the fund in IDA countries, or low-income countries as defined by the World Bank. This mitigates the risk of these investments, as there is a first loss guarantee. This means that if SIV II makes an investment in an IDA country like Senegal and the business is not doing well, part of the investment will be covered by the structure.
To help them grow, Seedstar’s portfolio companies participate in a program called the Value Creation Platform, which has a network of 1,300 mentors and includes a three-month “mentor-led sprint” called the Growth Track. Backed by Seedstars entrepreneur-in-residence Jon Attwell, formerly of Naspers and Prosus, with operators who have experience working at high-growth companies like Careem and SkyScanner. While in the Value Creation Platform, companies can run experiments to see which growth strategies work best for them.
“Startups can cover different modules, as if their key is acquisition,” Sosrodjojo said. “They can really look at their acquisition strategy and see if it’s not working well. They will work with their mentor and our entrepreneur-in-residence John, create a strategy, follow it, monitor it and see if it works. Each startup will decide what experiment they want to do and whether they want to translate it into their operation or not.
Gender equality is also important to Seedstars, which points to data that shows that only 11% of companies that get seed funding in emerging markets are led by women. The Seedstars team has already achieved a 50/50 gender split, and their first fund had 26% of companies co-founded by women. Seedstars issued a challenge for its second fund of at least 30% of its portfolio companies having female founders or directors. Another criterion is to support local founders.
“There are cases where there are expert founders with very good startups, but we try to cultivate local talent,” Sosrodjojo said.