EmergingTech Ventures is raising its second fund, targeting a first close of $40 million by early September. Based in Casablanca, the firm will stick to its impact-focused investment thesis but will expand geographically to back early-stage companies in other French-speaking countries in addition to Morocco.
EmergingTech is primarily interested in backing founders from francophone Africa who have emigrated to Europe.
Unlike other parts of the Middle East and North Africa, “we have a very active diaspora based in Europe that is willing more and more to return and contribute to the emergence of the mother countries,” EmergingTech general partner Sidi Mohammed Zakraoui told Venture Capital Journal. “From strategic guidance to operational support, we help them unlock the complex aspects of the region’s market dynamics and build efficient business models aligning stakeholders’ interests.”
Among LPs that have committed to Fund II so far are the International Finance Corporation (IFC), the World Bank’s investment arm, which has pledged $4 million, and a well-known European development finance institution (DFI) with investment experience in francophone Africa that has not yet announced its commitment.
“[DFIs] are dedicated to the development of the region and have a specific mandate to deploy their money in our region. And they are the most common investors you can find when it comes to investing in funds in North Africa,” Zakraoui said.
EmergingTech’s debut fund, which had its final close on $24.1 million in 2020, has invested in eight pre-seed and seed-stage start-ups in the fintech, agritech, health tech, biotech and cybersecurity sectors, with an average check size of roughly $1.5 million.
LPs in Fund I include the IFC, the US Agency for International Development, Caisse Interprofessionele Marocaine de Retraites (a public pension benefit plan based in Casablanca), BMCE Bank (in Casablanca) and Tamwilcom (a banking institution based in Rabat, Morocco).
Last year, EmergingTech sold its ownership stake in one of its eight investments, an edtech company called Cours des Grands (previously known as eDukaty). The Paris-based company had decided to pivot to a hybrid academic model that required fresh financing for a new service, which didn’t align with EmergingTech’s interests as it was winding down Fund I.
EmergingTech is seeing “strong valuation step-ups in six of the seven remaining companies in its portfolio” that have gone on to raise additional capital, Zakraoui noted. The firm expects those to drive exit momentum in late 2025 and 2026.
Founded in 2018, EmergingTech began as a subsidiary of Small Enterprise Assistance Funds (SEAF), a global investment manager based in Washington, DC, that invests in impact-oriented funds in emerging countries. The launch of Fund I was made possible through a public-private partnership with the Moroccan government under the World Bank’s sponsorship, said Zakraoui.
EmergingTech was one of three first-time fund managers selected to raise capital to match grants from the Innov Invest program, part of Morocco’s Ministry of Economy and Finance, which would serve as “an anchor investor” in its debut fund, he said.
Before founding EmergingTech, managing partner Meriem Zairi worked at Montagu Private Equity (formerly HSBC Private Equity) and served as investment director in the pan-European MBO Investment Fund, which had more than €4 billion in AUM. She helped raise and close a pan-African infrastructure fund as investment director in Casablanca. In 2017, she joined SEAF as senior managing director and led the SEAF Innovation Funds Initiative in Africa’s Maghreb region.
General partner Abdelouahid Benlamlih has a computer science engineering background and previously managed private equity funds in Casablanca with AUM exceeding $130 million that invested in high-growth small- and medium-sized enterprises in the Maghreb region. Joining SEAF in 2018 while Zairi was raising the Morocco Growth Fund, he became head of investments for that fund and also supported the SEAF Innovation Funds.
Zakraoui met Zairi and Benlamlih while serving as portfolio director at Endeavor, a global organization based in the US that sponsors entrepreneurship and venture capital in emerging countries. He joined EmergingTech a few months before it received funding from the Innov Invest program.
In 2022, the three partners personally funded a management buyout from SEAF. They were under pressure from institutional LPs in North Africa and beyond “to comply with the market standard, which is having the senior professional in the shareholder structure of the management company,” said Zakraoui.
After completing the spinout, EmergingTech accelerated its fundraising efforts, targeting $60 million for its sophomore fund, he said.
While continuing to invest in Morocco, the firm will broaden its geographic scope “to respond to the market needs of neighboring countries [Tunisia and Senegal are two he mentioned] that share common patterns when it comes to venture capital and doing business,” he added.
Fund II will invest in 20 companies in total, starting in the fourth quarter of this year or early 2025. Initial checks will range from $500,000 to $3 million, with the potential to do follow-on investments that would put up to $5 million in each portfolio company.
Disrupting the healthcare model
EmergingTech’s investment choices reflect its commitment to having a positive impact on people’s daily lives. The fund managers decided to back Docline, developer of a telemedicine platform that originated in Spain, and market it in Morocco as part of the company’s global expansion plans. EmergingTech co-led the $2.95 million funding round that Docline raised in November 2022.
Docline recently secured its first major contract in Morocco with Concentrix (formerly Webhelp). The company’s virtual care app, which includes video consultation services, EHR and e-prescriptions, gives more than 10,000 employees at Concentrix and their families instant access to doctors. Docline is the first company in Morocco to disrupt the traditional healthcare model.
“Whenever we support any new technology that can solve endemic problems in Morocco or Tunisia or francophone Africa, we open the door and build with the founders the go-to-market [proposition] for this kind of solution,” said Benlamlih.
Cultural differences between markets
Zakraoui noted some key differences in backing start-ups in Africa’s francophone countries versus its anglophone countries like Egypt and Nigeria, starting with the size of the markets.
Egypt and Nigeria “have very deep domestic markets that can justify some business models to be replicated there, which is not the case in Morocco, Tunisia or Senegal,” he explained.
EmergingTech’s entrepreneurs “think globally when it comes to tech,” he said. “They know they can’t rely only on the domestic markets, which pushes them to build very strong technological assets because they know their growth will rely on the quality of their tech assets, and not only on the local market opportunity.”
The firm’s portfolio companies are operating in 20 countries, including the US. Spore.Bio, whose machine learning-enhanced bacterial detection technology helps make food production safer, is now expanding into the US market. EmergingTech participated in Spore.Bio’s $8.9 million seed round in December.
The regulatory frameworks in francophone countries, based on French standards, are narrower and more structured in key verticals like fintech and logistics than those in Egypt or Nigeria, with implications for unleashing the potential of start-ups in those markets.
At the outset of the start-up wave that “was a challenge because it was more protecting traditional incumbents,” Zakraoui said. “But following the pandemic, the regulator [in Morocco] shifted its mindset and is now helping start-ups to bring solutions that can help the country leapfrog [their] challenges.”
Lastly, while Morocco’s infrastructure is more developed than that of several other countries in the Middle East and North Africa, there is a need to invest in technology solutions that can make it operate more efficiently, he added.
Besides the fact that many underserved people have been left out, “we also have strained public budgets, so we need to back digital solutions, technology solutions, in start-ups that will help relieve public budget [obligations],” he said.