Africa’s “Uber for trucks” Lori Systems has closed a Series A funding round led by Chinese investors Hillhouse Capital Group and Crystal Stream for an undisclosed amount, as Chinese investors look beyond the US for opportunities.

Why it matters: Increasingly blocked from investments in the US, Chinese venture capital investors have been turning to opportunities in Africa, which Crystal Streams has said was ripe for investment as economic growth ramps up and sectors like mobile internet begin to take off.

  • Chinese investment in the US fell to $4 billion in the first nine months of 2019, according to the Financial Times citing a Refinitiv report, compared with nearly $7 billion for the same period in 2018 and $9 billion the same time frame in 2017.
  • Chinese investment in major infrastructure projects overseas has been on the rise, particularly those tied to Beijing’s Belt and Road Initiative, which critics say is creating unsustainable levels of debt to China for developing countries, to the tune of 20% of gross domestic product in some cases, according to the Council on Foreign Relations.
  • For its investors, Lori’s e-logistics ambitions—when combined with China’s significant investments into Africa’s physical infrastructure—tap into the potentially lucrative business of driving down the cost of goods. In Kenya, for example, transportation costs account for 75% of product prices.

“We think that infrastructure-related technology such as informalized logistics platform is one of the most important cornerstones of the business development in Africa.”

—Wang Mengqiu, founding partner of Crystal Stream 

Details: The series A funding round also included participation from Russian billionaire Yuri Milner’s Apoletto Asia, Timon Capital, Raba VC, Endeavors Catalyst and EchoVC Partners, DealStreetAsia reported.

  • Founded in 2016, Lori Systems is a logistics coordination platform that connects cargo owners to transportation, providing real-time information that can be leveraged to reduce inefficiencies in the transportation of goods. 
  • According to Lori CEO Josh Sandler, the firm will use its new funds to “ramp up operations, build up our technology, and hire a best in class team…that can drive a global revolution in logistics.” 
  • Although the amount raised has been reported as $30 million, Lori leadership has declined to disclose the amount. 
  • A fresh injection of capital will bolster Lori’s efforts to expand across Africa. It already operates in much of East Africa, and recently established a presence in Ghana and Nigeria to the west.  

Context: This Chinese investment in a startup like Lori Systems comes at major period of growth for African tech startups. 

  • According to a report by French venture capital (VC) firm Partech Africa, 146 African startups raised $1.163 billion in equity funding last year over 164 rounds, which equates to a 108% year-on-year growth in funding. 
  • Lori’s home base of Kenya was the continent’s leader in equity funding with 44 deals that combined for $348 million.
  • China-Africa trade reached $204.2 billion in 2018, according to China’s vice minister of commerce Qian Kenming. 
  • By the end of 2018, there were more than 3,700 Chinese companies operating in Africa, with a total investment of $46 billion. 

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