- The $147M NovaStar Ventures Fund, backed by leading Japanese companies, offers co-investment rights in African startups to bridge the funding gap.
- This strategic structure positions Tokyo's corporate giants as potential acquirers, providing an important exit route for regional entrepreneurs.
- Japan's deeper commitment to Africa comes at a critical time, as US venture capital firms have reduced their investments on the continent.
Mitsubishi Corp, Sumitomo Mitsui Banking Corp and Toyota Ventures LLC joined a $147 million Africa-focused venture capital fund managed by Novastar Ventures, the largest single fundraising by an Africa-focused VC firm backed primarily by Japanese corporate capital, Bloomberg News reported on Tuesday.
The fund, Novastar Ventures Africa People & Planet Fund III, also counts SBI Holdings Inc., Mitsui OSK Lines Ltd. and Japan International Cooperation Agency among its limited partners, according to Steve Beck, partner at Novastar. Other backers include British International Investment, Norfund, Swedfund, Proparco and COFIDES, Beck said in a Bloomberg interview. According to JICA's press release, JICA had signed its $10 million commitment in August 2025 – its first investment as a limited partner in an African venture capital vehicle – making Tuesday's announcement the second formal disclosure of Japanese institutional support for the fund.
The deal structure goes beyond standard LP economics. “Japanese investors want access to knowledge and deal flow on the continent,” Beck told Bloomberg. 'We are also giving them co-investment rights in companies.' Co-investment rights give limited partners the option to deploy additional capital directly into the fund as well as into Novastar's portfolio companies – effectively purchasing a perpetual option on the continent's most promising startups before they reach international markets.
The closing marks a counter-cyclical bet by Tokyo at a time when traditional venture capital has increasingly retreated from Africa. According to the Venture Capital in Africa report cited by Bloomberg, Africa-focused VC funds raised only $107 million across six closings in 2025 – an 87% decline from the previous year and the first time since 2021 that no fund exceeded $100 million. At the same time, more than 60,000 Japanese investors backed more than 190 deals on the continent in 2025, according to research firm Britter, including corporate venture branches, banks and public agencies.
corporate strategy
Support from large Japanese corporations reflects domestic calculations. Japanese companies have accumulated significant cash reserves that they need to deploy in high-growth markets, and Africa's demographic trajectory – the continent's population is projected to reach 2.5 billion by 2050, according to United Nations estimates – offers a scale of consumer growth that Japan's own contract market cannot provide. According to an SMBC press release published in August 2025, Sumitomo Mitsui Banking Corp. entered the fund through its Social Value Creation Investment Fund, which the bank established to co-develop new businesses with clients in markets with five sustainability priorities.
Novastar, which was founded in 2014 and operates out of Nairobi and Lagos, presents its greentech thesis with clear urgency. If companies would simply replicate the Global North's industrial strategy, 'we're all in,' Beck told Bloomberg. 'If we connect some of these planet-positive technologies to the rapid growth engine in Africa, the new economy could accelerate.' Beck said the fund has backed electric bus company Basigo, Greenwheels – which manages the fleet for Uber's two-wheeler electric vehicle operations in Kenya – and ARC Ride, which operates battery-swapping infrastructure for e-mobility. It also invested in Egypt's Breadfast, which raised $50 million in early 2026, and Nigerian online food company Chowdek, which is electrifying its fleet.
The co-investment rights embedded in Fund III represent a structural innovation in Africa's exit scenario. The continent's venture pipeline has expanded at the seed level while narrowing at the top: none of the 35 startups that raised Series B rounds between 2023 and 2024 had advanced to Series C by the end of 2025, according to data published in February 2026 by ESI Africa, citing AVCA data. Japanese corporates, as potential strategic acquirers with deep pockets and long investment horizons, can provide an exit route that Europe and US-based investors have been unable to offer so far.
The new fund's geographic footprint extends NovaStar's reach to South Africa – a market the firm had not previously targeted, Beck said. This expansion coincides with a widespread concentration of capital in the continent’s most established ecosystems: Egypt attracted the most funding of any country in Q1 2026, at $190 million, followed by South Africa at $157 million, according to Condia funding tracker data published this week.
A signal to watch is whether co-investment rights translate into a takeover. The first Japanese corporate purchase of an Africa-backed startup from a Fund III portfolio company will set a precedent that the continent can produce exits on an industrial scale – and will likely trigger a significant expansion of Japanese institutional capital into African ventures, more than any single fund has indicated so far.
Idris Linge