Africa’s start-up investment sets to outpace 2018’s $725m record level

African start-ups are on track to attract more investment that will surpass the historic $725 million raised last year.

In the 10 months to October 2019, African start-ups secured funding worth $699 million, $26 million short of the amount raised last year, a report by Maxime Bayen, a foremost African investment firm, shows.

“2018 was a breakout year for African start-ups. In total, they raised a historic $725 million, three times the total value of 2017 deals by some counts. 2019 is on pace to set new records,” the report states.

Also, this year has seen innovation hubs such as incubators, co-working spaces, and other institutions that support entrepreneurs multiply and mature. The Global System for Mobile Communications Association counts 643 African tech hubs, up more than 40 percent from last year.

Gbolahan Ologunro, an equity research analyst at Lagos-based CSL Stockbrokers, says Africa’s start-up investments may likely reach the same level of last year or surpass it, if the industry remains supportive of continued inflows for start-up investments.

“If the opportunities and potentials inherent in the industry support funds, particularly for start-ups who are looking to exploring the fintech space, then it will outpace it,” Ologunro says.

So far this year, start-ups in Kenya, Nigeria, South Africa, and Egypt have claimed 73 percent of deals over $1 million and 71 percent of the funding from those deals.

From the research report, this shows that these four countries 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 percent of venture capital funding on the continent.

Despite Africa’s start-up space being more attractive to investors, 2019 investments are still below other continents in the world.

For example, Southeast Asia’s technology-driven start-ups raised close to $6 billion in more than 332 deals during the first half of 2019. In the first half of 2019, Latin American start-ups recorded $2.6 billion across 160 transactions in the first six months of 2019 and tech investment in Europe had €19.2 billion.

“Development in the fintech space in Africa is still largely below other regions in the world. Africa still falls short in what is obtainable in other regions of the world,” Ologunro states.

While fintech continues to lead in deals in 2019 as it also did in 2018, it appears that there are signs that funders are seeking more diverse investments.

“Just 28 percent of funding from deals over $1 million went to fintech, and this year’s only $100 million deal went to education software start-up Andela,” the report states.