Global interest, local impact: Seedstar’s Cyrine Ben Fadhel's outlook for African VC

After graduating from HEC Montréal in Canada, Cyrine Ben Fadhel embraced Beyoncé's advice and "found her way back" to Tunisia. Despite potentially lucrative opportunities in Quebec, where she had studied, Cyrine made the deliberate choice to return home, driven by her belief in her ability to positively influence Africa's trajectory.

Initially interning at the largest insurance company in Canada, Manulife and then working at Deloitte upon her return, Cyrine found herself unsatisfied and craving more impact. Taking a bold leap, she left Deloitte to join a VC firm as an unpaid intern, a decision that would ultimately redefine her career trajectory.

Reflecting on this life-changing moment, Cyrine recalls, "Thankfully, I was able to bounce back quickly over the years and ended up managing a $20 million mandate for Fondation Botnar, a Swiss institution with over $4 billion in AUM."

Three years later, Cyrine has emerged as a leading figure in the African VC ecosystem, with a diverse portfolio of experiences spanning renowned organizations such as Global Ventures and Seedstars Youth Wellbeing Ventures [SYWV], where she currently serves as an Investment Manager.

In our discussion for Investors Corner, Cyrine shared insights into innovative fundraising strategies, offered advice for aspiring VC investors, and shed light on how Seedstars effectively balances its mission-driven ethos with the imperative for financial returns.

How does Seedstars Youth Wellbeing Ventures’ "foundational technologies" thesis shape your investment decisions within the African market?

Our investment decisions at Seedstars Youth Wellbeing Ventures (SYWV) are deeply influenced by our "foundational technologies" thesis, particularly within the African market. Our thesis revolves around supporting businesses that offer foundational services essential for improving the quality of life for the youth demographic. These services span crucial sectors such as healthcare, education, housing, credit, transportation, electricity, and water access.

In practical terms, this means we prioritize investments in ventures that demonstrate a clear commitment to addressing the fundamental needs of the youth population in Africa. We seek out scalable solutions capable of reaching large numbers of people, thereby maximizing their positive impact. Africa's rapidly expanding youth demographic presents an unparalleled opportunity, and we aim to capitalize on this potential by supporting ventures that align with our thesis and have the capacity to significantly improve the everyday lives of young Africans.

What’s the motivation behind this thesis?

The motivation behind our thesis at Seedstars Youth Wellbeing Ventures stems from a powerful collaboration between Seedstars and Fondation Botnar, a Swiss philanthropic foundation with significant assets under management, totaling over $3 billion. They are wholly committed to leveraging their resources to shape a brighter future for young people, particularly in urban areas across the globe.

By aligning with Fondation Botnar's mission, our thesis is driven by the profound belief that investing in initiatives that prioritize the well-being of youth populations can catalyze positive and lasting change. We are motivated by the shared vision of creating opportunities and fostering development for young people, ultimately contributing to the betterment of communities worldwide.

What are some of the biggest challenges Seedstars Youth Wellbeing Ventures faces when investing in early-stage African startups?

One of the significant challenges that Seedstars Youth Wellbeing Ventures faces when investing in early-stage African startups is governance, particularly when investing in pre-seed businesses through instruments like Simple Agreements for Future Equity (SAFE).

While SAFEs offer a fast, easy, and cost-effective way to close transactions, they can lead to centralised decision-making around the founder without proper oversight from a board. This lack of governance structure can potentially hinder the growth and stability of the invested companies. However, we are encouraged by the resurgence of traditional investors opting for priced rounds at the seed stage. We actively advise our founders to consider this route, which helps establish a more robust governance framework and support system.

Another challenge we encounter is the misconception among some small and medium enterprises (SMEs) that they are suitable candidates for venture capital (VC) funding. We often find ourselves in the challenging position of explaining to founders why their business may not be the best fit for VC investment. 

This highlights the crucial need for education within the industry about alternative sources of financing. By engaging in these conversations and promoting awareness about various funding options, we can optimize the limited capital available for investment on the continent and ensure it is directed towards ventures with the highest potential for growth and impact.

How do you balance Seedstars' mission-driven approach with the need for financial returns?

At Seedstars Youth Wellbeing Ventures (SYWV), we firmly believe that our mission-driven approach and the pursuit of financial returns are not mutually exclusive. We see them as complementary elements that can be balanced effectively. Our focus on impact investing in Africa spotlights this balance, as the continent presents immense opportunities for both making a difference and generating financial gains.

Unlike some investment sectors in more developed markets, our venture capital activities in Africa naturally lend themselves to making a tangible impact. With vast segments of the population lacking access to essential services like electricity, banking, and insurance, every investment we make has the potential to catalyze transformative change for millions of people across the continent.

While our primary goal is to create a positive social impact, we recognize the importance of financial sustainability. By investing in ventures that address critical societal needs, we not only contribute to the betterment of communities but also position ourselves to achieve attractive financial returns. This dual focus is what drives us in our mission to support impactful startups while also delivering meaningful financial results, making our work in emerging markets incredibly fulfilling and rewarding.

How do you navigate the often-limited data and information available when evaluating African startups?

Navigating the challenge of limited data and information when evaluating African startups requires a combination of resourcefulness, leveraging available resources, and tapping into extensive networks.

Fortunately, we now have various platforms and initiatives dedicated to addressing this challenge head-on. Entities such as Stears, TechCabal, Maxime Bayen, and Briter Bridges have been instrumental in providing valuable market intelligence, industry insights, extensive databases, and comprehensive reports. These resources offer invaluable support in our evaluation processes, helping us gain deeper insights into potential investment opportunities.

However, despite these advancements, the ability to effectively navigate data limitations ultimately comes down to the investor's resourcefulness and networking capabilities. Successful investors in the African market are adept at tapping into their networks, reaching out to relevant contacts, and leveraging platforms like WhatsApp to access crucial data points and insights. This skill of effectively mining information from personal connections remains a vital differentiator between investors who are in tune with the market dynamics and those who may overlook critical nuances.

Therefore, as investors, we continuously hone our abilities to extract meaningful information from our networks, ensuring that we make informed and meticulous investment decisions.

How do you think the increasing global interest in African startups will impact the VC landscape in the coming years?

In the coming years, I anticipate a resurgence of foreign investors in the African startup ecosystem, but with a notable shift in approach. Unlike previous waves of investment characterised by a perceived superiority and detachment from local realities, this time, foreign investors are likely to adopt a more collaborative and informed strategy.

Rather than relying solely on their expertise and assumptions, foreign investors are expected to recognize the value of local insights and expertise. This shift will manifest in closer collaboration with local investors who possess a deeper understanding of the nuances and dynamics of the African market.

I foresee a symbiotic relationship emerging, where foreign investors actively seek partnerships with local counterparts. This collaboration may take various forms, such as requiring a local co-investor in funding rounds or participating as limited partners (LPs) in local funds. By engaging in such partnerships, foreign investors can gain a better understanding of the market landscape and leverage local knowledge to identify and seize investment opportunities effectively.

Overall, this trend towards collaboration between foreign and local investors signifies a more nuanced and informed approach to investing in African startups. It represents a positive evolution in the VC landscape, one that is built on mutual respect, shared expertise, and a collective commitment to supporting the growth and success of the continent's entrepreneurial ecosystem.

What are some innovative fundraising strategies you've seen African startups employ to secure funding?

I’ve not noticed any groundbreaking approaches so far, but rather a return to fundraising basics. Unlike the previous trend where founders could rely solely on a compelling pitch deck to secure funding, today's entrepreneurs are adopting a more comprehensive approach. They come to the table armed with detailed data rooms, and in some cases, they even take the initiative to craft investment memos outlining their business propositions.

This upfront preparation not only demonstrates a higher level of professionalism but also streamlines the investment process significantly. By providing investors with comprehensive insights into their businesses from the outset, founders enable investors to dive straight into the critical aspects of the venture. This approach saves valuable time that would otherwise be spent on basic due diligence, allowing both parties to focus squarely on the key factors that influence investment decisions.

Looking back, what were the most crucial steps you took to break into the VC world after returning to Africa?

I attribute a significant portion of my success to luck. Being in the right place at the right time played a crucial role in opening doors and presenting opportunities.

One step that seemed to enhance my luck was when I published a prediction regarding the fate of Jumia, although it turned out to be incorrect, it garnered attention and sparked conversations within the industry.

Another significant decision was making the necessary sacrifice to optimize for long-term career growth. This involved leaving a secure full-time position at Deloitte to join a VC firm as an unpaid intern. While it was a short-term financial hit, I recognized the potential for a more rewarding career trajectory in the long run.

Fortunately, my dedication and hard work paid off, and I was able to progress swiftly within the VC landscape. Eventually, I found myself entrusted with managing a substantial $20 million mandate for Fondation Botnar, a respected Swiss institution with significant assets under management.

Overall, while luck played a part, it was combined with strategic decisions and a willingness to make sacrifices that ultimately propelled me into the world of venture capital in Africa.

What advice would you give to aspiring African VC investors, particularly those from the diaspora?

One crucial piece of advice is to "do the job before getting the job." This means actively immersing yourself in the VC ecosystem, sourcing deals, and building relationships with key players in the field. By showcasing your dedication and enthusiasm, you not only gain valuable experience but also establish yourself as a credible and committed member of the community.

Remember that it only takes one person to believe in you and provide you with an opportunity to prove yourself. In my case, it was individuals like the team at Lateral Capital, including Steven Grin and Rob Eloff, who saw potential in me while I was working as a strategy consultant at Deloitte. Their belief in me led to my first job in VC, opening doors to a fulfilling career in the industry.

So, my advice is to network, engage with the community, and actively seek out opportunities to contribute and learn. By demonstrating your passion and dedication, you can pave the way for a successful career in African VC investing.