EchoVC launches $8 million fund for African blockchain startups

EchoVC, a pan-African VC firm with a global presence, has announced a new $8 million fund dedicated to blockchain startups in Africa. Called the EchoVC Chain Blockchain Fund, the fresh capital will be deployed to blockchain startups that underpin the utility of blockchain products and address some of Africa’s pressing challenges.

EchoVC is raising this capital in particular at a time when the general confidence of customers and investors in crypto and blockchain startups seems to be hanging by a thread. The past year has not been rosy for blockchain players in African technology. First, the global funding downturn hit the crypto space, causing a 75% Q4 drop in crypto investment globally; and after that was the collapse of Sam Bankman-Fried’s blockchain empire, FTX. The company, with its extensive roots and investments in Africa, filed for bankruptcy and siphoned off significant runway funding from African blockchain-powered startups, including Nestcoin and Chipper Cash.

In the first quarter of 2023, promising blockchain startup Fluidcoins was desperately sold after its founder, Lanre Adenowo, could not secure funds beyond an initial $150,000 from nearly two years earlier. It was the first time a crypto startup was sold in Nigeria, but the struggle behind the sale raised arguments for a suffering blockchain ecosystem, rather than an expanding one.

EchoVC’s founder and managing partner, Eghosa Omoigui, acknowledges these struggles, but he is convinced that there is no better time than now to launch the blockchain-focused fund for African startups.

“The global investment crisis is affecting all tech sectors, not just crypto, and has caused a decline in startup valuations across all tech sectors. But this allows us to invest at lower entry values ​​on average than previous years,” Omoigui said in a chat with TechCabal.

“While this has somewhat reduced VC appetite for crypto investment, we continue to be excited about the useful applications of crypto and blockchain in Africa, and believe that crypto entrepreneurs in Africa will continue to build for functionality to solve problems in Africa,” added he to. .

EchoVC, a sector-agnostic venture capital firm, made its foray into blockchain investing in 2021 by participating in Fonbnk’s $3.5 million seed round. Since then, the VC has invested in seven blockchain-powered startups across three sub-sectors: B2B infrastructure, B2C DeFi and market making. For the pan-African VC firm, blockchain’s ability to tokenize and scale autonomously is exciting and obviously compelling enough to create a dedicated fund for, especially in an underserved market.

Underrepresented entrepreneurs and underserved markets

Branded as Sequoia Capital for underrepresented founders and underserved markets, EchoVC has distributed over $41 million to around 36 different startups globally. Its footprint in Africa – a typically underserved market – spans Nigeria, Kenya, South Africa and Uganda.

Viewed through the lens of blockchain investment, Africa’s position as an underserved market brings to the fore the argument as to whether the continent is ready to adopt blockchain technology solutions at scale. Admittedly, Africa has a wild thirst for crypto. Countries like Nigeria have topped the charts of global crypto adoption and usage, trailing only the US and Russia in traded crypto volumes in 2020. However, this impressive feat becomes questionable when considering the usefulness of crypto in Nigeria; it is unlikely to go beyond P2P transactions and to a lesser extent remittances.

Solutions like Fluidcoins, which introduced crypto-powered wallets, savings and marketplaces, struggled to get off the ground in Nigeria, a country recognized globally as having the highest adoption of cryptocurrency. Similarly, Lazerpay, a blockchain solution that enables businesses to receive crypto payments, is going through its dark valley. Last year, the supposed lead investor pulled out of the company’s seed raise, prompting the firm to lay off employees to expand its runway.

Q: Is Africa really underserved, or are Africans averse to crypto adoption beyond traditional payment options? EchoVC believes the former, as it strives to fund the continent into a hub that embraces blockchain solutions with real utility.

“The blockchain ecosystem is still growing in Africa. At EchoVC, we aim to invest in and help build startups that will become the African success stories of the future. We are completely focused on founders who build highly functional and resilient products that create limited to zero cognitive load, Omoigui said.

“The companies we support play across the spectrum of time and utility: trying new innovations that help refactor, augment and improve traditional solutions (rather than directly disrupting them), but also have paths to long-term opportunities with future innovations that are in line with the respective founder’s visions,” he added.

EchoVC’s investment strategy

EchoVC plans to distribute $8 million through three focus areas. First, the VC firm will look for startups leveraging blockchain to power basic fintech infrastructure. This will include infrastructure that leverages stablecoins to optimize payments, liquidity and treasury.

Blockchain functionality is EchoVC’s other area of ​​focus. The company believes DeFi can be explored to build solutions that provide access to credit and savings, while NFTs can strengthen the gaming and creative economy.

EchoVC’s ultimate investment focus is startups that leverage decentralized autonomous organizations (DAOs) to scale, organize human networks, and unlock labor liquidity in ways that can promote prosperity for Africans.

“Looking beyond these, we continue to explore other new blockchain aspects, ranging from digital identity, privacy, decentralized infrastructure edge nodes and agile supply chains to a possible future intersection of AI/ML and DAO,” an EchoVC post said.

Omoigui expects EchoVC’s portfolio to have grown to between 12 and 20 companies by the end of the fund’s deployment, which will have check sizes ranging from $250,000 to $500,000.

“VC is a long game and so over the next few years we want to be able to make our portcos resonate with their users and help with primary and parallel economies that are accessible to and funded by everyone,” maintained Omoigui.