Avanz Capital joins Algebra Ventures’ Fund II: Private equity outfit Avanz Capital has joined tech-focused Egyptian VC Algebra Ventures’ second fund as a secondary limited partner (LP) through its direct investment arm Avanz Manara, according to a joint statement (pdf).

REMEMBER- Algebra Ventures’ Egypt-focused second fund reached a USD 100 mn first close in 2022, surpassing its USD 90 mn initial target. The close was backed by international limited partners including the IFC, EBRD, and EAEF as well as FMO, BII, MSMEDA, DGGF and regional family offices. At the time, Algebra said it plans to back 31 startups pursuing early-stage investment opportunities in sectors like fintech, agritech, edutech, and e-commerce.

What they said: “We are proud to partner with Egypt’s leading tech-focused venture capital firm. This transaction represents not only one of the first secondary LP investments in Egypt, but also a milestone that reflects the strength and growth of the local ecosystem,” Managing Director of Avanz Capital Haytham Wagih said in the statement.

“We’ve known Avanz for a very long time, we’ve been friends and co-investors in portfolio companies. We’ve always talked about the potential LP position and it felt like the right time,” Tarek Assaad, Managing Partner at Algebra Ventures, told EnterpriseAM.

New market activated: “Part of our role is bringing local investors into the market — foreign investors typically follow locals — and activate the secondaries market in VC and PE,” Wagih noted. Liquidity can come from primary exits (a fund exits an investment and returns capital to LPs) or secondary exits, where LPs sell their stakes to other LPs, Wagih explains. The secondary LP market is inactive in Egypt, though active in developed markets and in some developing ones like South Africa, he added.

The process getting here: “We’ve screened Egypt-focused funds, including Algebra, which we consider among the best and we found the opportunity to invest,” Wagih told us. “We also want to help activate LP-led secondaries in Egypt — to show there are feasible LP-to-LP opportunities and to ease general partners (GP) pressure for constant exits that may not always serve fund performance.” Algebra is one of the few experienced fund managers in Egypt and the region and we have a strong relationship with them, he added.

“Egypt needs higher allocations to private capital,” Wagih said. Across most GPs, the majority of capital in private markets (VC, PE, private debt) comes from outside Egypt. We need local institutional investors to allocate — it benefits the macroeconomy, not just individual GP/LP performance, Wagih added.

“From a GP perspective, it’s great that 90-95% of our capital is international — it signals confidence — but we want to increase local capital,” Assaad said. Local investors need to understand tech VC as an asset class and its long-term potential. It’s early and risky, but important. Also, in very tough times, the ecosystem needs local capital: international investors can be spooked by sharp currency moves; locals better understand that a 50% hit may cost a year-and-a-half of growth, but doesn’t kill a company growing 2-3x annually. “Lack of product-market fit kills businesses, not just FX shocks. This is when the local capital should step in. Avanz is taking a leading role here, and we hope to see more,” Assaad told us.

“Many fundamental issues in Egypt won’t be solved without technology,” Assaad noted. Banks/retailers won’t set up shop in distant villages, but mobile infrastructure and app familiarity are widespread. Tech enables communication, news, purchasing, payments, and credit. Turbulence can happen, but tech startups solving fundamental problems remain attractive, he added.

What’s next for Avanz Capital? We’ve started working on our next fund — a blend of our fund-management experience and a direct-investment strategy — leveraging relationships with GPs in Egypt and Africa, Wagih said. We see a big gap at the growth stage (between VC and PE) — the “forgotten middle” — with financing and support gaps for companies graduating from VC but not yet PE-scale. We’re fine-tuning our strategy to launch the new fund, focusing on size and sector gaps, including export-focused and import-substitution sectors, and companies exporting to Europe that need to reduce costs and compete, Wagih told us.

And what’s next for Algebra Ventures? Through Fund II, we deployed investments in 14 companies, two of which are in Morocco, Assaad said. While 80% of the fund will target startups in Egypt, we want to do more in Morocco, and we are looking at Nigeria, Kenya, South Africa as expansion opportunities beyond Egypt, Assaad explained.

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