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Tofino Capital reaches first close of $10M fund to back startups in frontier markets – TC


Tofino Capital, a venture capital firm targeting early-stage startups in emerging markets, has launched its $10 million fund. It is announcing the first close of this fund at $5 million and hopes to achieve a final close nine months from now.  

The firm, founded by Eliot Pence and Aubrey Hruby, wants to back startups in Africa, Asia, Latin America and the Middle East.

“The main thesis of the fund is to target large markets with hundreds of millions of people that have minimal access to venture capital. So that does not include China, India, Brazil, those kinds of big markets with a lot of venture capital,” general partner Pence said to TC in an interview.

“What we’re talking about here is like Bangladesh, Egypt, Nigeria, Pakistan, Philippines, Mexico, that’s our play — it’s this kind of where venture is basically under $5 per capita, and that’s what’s attracted a lot of interest to this next group of big markets.”

Hruby said that Tofino Capital focuses on startups in the B2B segments, particularly those with fintech, logistics, and marketplaces themes.

The founding partners have some history together, having worked for 15 years with various U.S. companies and family offices involved in investing in frontier markets, such as the Whitaker Group and the Atlantic Council.

In 2018, Pence and Hruby ventured into public relations when they founded InsiderPR, a firm Hruby said works with “invisible entrepreneurs rarely covered in global media.” InsiderPR is one of the well-known PR firms in African tech and has worked for more than 100 startups, including SWVL, Flutterwave and Foodology.  

But their work in Africa’s tech extends beyond co-founding a PR firm. Hruby, for instance, co-wrote a book with former TC contributor Jake Bright in 2015 on the continent’s potential to become a global powerhouse. She even worked in an advisory role for AOL’s Steve Case on investments in African startups at some point.

The culmination of these experiences and being involved in tech across emerging markets early enough gave the partners all the firepower and access to turn into angel investors down the line.

“We’ve been exposed and kind of on the front lines of Africa tech for several years and we’ve done some angel investing. And that angel investing has come as a result of InsiderPR, which gave startups access to opportunities at a very early stage,” said Hruby.

They made their first angel investment in Seamless HR in 2018 and have backed 11 more endeavors since then, including Sabi, Mecho Autotech and Eksab. In late 2021, they started fiddling around with the idea of setting up a venture fund. Tofino Capital, the outcome, takes things up a notch for the partners as they become equity participants institutionally for the first time. They are yet to write checks from this fund.

Pence said Tofino Capital plans to invest between $50,000 and $500,000 in early-stage companies, mainly in pre-seed and seed stages. And unlike the traditional thesis where VC firms bank on one startup in their portfolio to return the fund, Tofino Capital plans to adopt a different approach, where it “gets in early and gets out fairly early, too.”

We think Africa’s next growth phase won’t be the kind of $1-42 billion Flutterwave and Andela types. It’ll be growing these mid-market companies of $200-$500 million profiles,” Pence noted.  

That’s not all, though. For a very early-stage-focused firm, Pence mentioned that Tofino Capital is also interested in “particularly late” startups, in other words, the pre-IPO types.

It’s quite an audacious strategy, and, according to Pence, investing on both ends of the spectrum is the best risk-hedged approach to investing in emerging markets. But as a small fund with check sizes of less than $1 million, how does the firm intend to sweet talk Series C and later companies to part with some equity? Some leverage outside funding.

“So it’s super unique; it’s what we’re calling the barbells strategy here. We’ll probably do about 30 to 40 pre-seed and seed deals, and then less than five late-stage investments,” said the founding partner.

“Now, getting into those late-stage rounds with a smaller check size will be hard, but we think we’re going to be able to do so because we bring differentiated capital. It’s not just about the dollars; our backgrounds are in government relations, PR and new market entry. So that’s the play. We have developed some of those relationships with the late-stage companies and we hope it plays out.”

The fund’s limited partners include U.S. and European family offices, WS Investment Company, the investment fund of law firm Wilson Sonsini Goodrich & Rosati, and executives from a cross-section of U.S. startups.

As market opportunities in Africa and surrounding frontier markets continue to open up, small- to medium- sized funds with $10 million to $50 million of capital to deploy will grow in numbers as investors hope to back the next set of billion-dollar companies early. Africa-focused firms to have launched such funds within the past year include Uncovered Fund, LoftyInc Capital, Savannah Fund, and Ventures Platform.



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