• Saturday, December 09, 2023
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African start-ups secure $699m deals in 10months

African start-ups secure $699m deals in 10months
African start-ups are on track to set new records in the value of deals recorded in 2019.
As of October 31, a total of 73 start-ups have secured at least $1 million each in funding and $699 million in total, according to data provided by Maxime Bayenof GreenTecCapital, a research firm that tracks Venture Capital deals across Africa.
That’s a new high compared to the historic $725 million deals raised in the whole of 2018 which at that time was three times the total value of 2017 deals by some counts.
Start-ups in Kenya, Nigeria, South Africa, and Egypt take the shine claiming about 73 per cent of deals that are worth over $1 million, and also, accounting for about 71 per cent of the funding from those deals.
This shows the domineering power of these countries as they continue to dominate Africa’s start-up scene—though not to the extent they did last year. In 2018, Kenya, Nigeria, and South Africa alone claimed 78 per cent of venture capital funding on the continent.
Tools to help entrepreneurs launch businesses are still concentrated in these regional powerhouses. Of the 643 active hubs offering funding, facilities, and other in-kind support to African innovators, 42 per cent are located in one of the four leading tech countries. Cairo, Cape Town, Johannesburg, Lagos, and Nairobi each have 20 or more hubs.
French-speaking countries have lagged their anglophone neighbours in startup funding. Language barriers with potential investors and relatively small economies are challenges to entrepreneurs in West and Central African countries in particular. But 2019 has seen that trend start to change as Senegal, Côte d’Ivoire, Mali, and Togo— as well as Morocco, Tunisia, and Algeria in North Africa—see growth in their economies and startup ecosystems.
The year 2019 has also seen innovation hubs—incubators, co-working spaces, and other institutions that support entrepreneurs—multiply and mature. The Global System for Mobile Communications Association (GSMA) counts 643 African tech hubs, up more than 40 per cent from last year.
The start-ups themselves have also reached important milestones. For example, Jumia, an e-commerce platform, became the first African start-up to list on a major stock exchange when it went public in April.
Besides overseas venture capital and private equity, foreign corporations and governments also invest in African start-ups. Goldman Sachs has led fundraising for two African start-ups this year: a $30 million round for Kenya’s Twiga Foods and a $10 million round for Nigeria’s Kobo360. France has pledged to invest $2.8 billion in African entrepreneurs by 2022.
Four in 10 Africa-focused VC funds are now based in Africa. These points to the young but fast-growing classes of home-grown venture capital funds that are changing the way African start-ups raise capital. Local angel investor networks are also growing as wealthy Nigerians, Kenyans, and South Africans begin funding new ventures.
The Dakar Angels Network, Lagos Angels Network, Benin Business Angels Network, and Africa Business Angels Network were all founded in the last decade.
In 2018, fintech was the unrivalled leader of venture capital investment in Africa: The industry secured 40 per cent of the funding raised that year. Mobile banking has been incredibly successful in African countries, where apps can provide the financial infrastructure that reaches previously unbanked and underbanked populations.
Fintech’s success in raising capital reflects these platforms’ importance. While fintech continues to lead in deals in 2019, there are signs that funders are seeking more diverse investments. Just 28 per cent of funding from deals over $1 million went to fintech, and the year’s only $100 million deal went to education software start-up Andela.