Venture capital (VC) investments are spreading throughout an ever-widening swath of Africa, with South Africa, Nigeria, Egypt, and Kenya serving as epicentres.
African Venture Capital: A Global Frontrunner
In 2021, African tech startups closed deals worth three times as much as in 2020, according to data supplied by Partech, an investment platform for tech and digital enterprises. As a result, the average round sizes for African tech startups have surpassed their 2020 levels, making the continent’s startup ecosystem the fastest-growing in the world. This increase is mostly attributable to the growing number of domestic and foreign investors in African technology firms.
Highlights by Country
Throughout 681 equity deals in 2021, 640 African IT startups raised an astounding US$5.2B. Seventy-three percent of the overall investment came from only four countries: Nigeria, South Africa, Egypt, and Kenya, with Nigeria contributing half of that.
When it comes to investment and equity rounds, Nigeria’s tech VC sector is currently at the forefront of Africa. The report notes, however, that by 2021, only four countries will account for 73% of the total. The rise of Senegal to fifth place, with US$353M raised, is also highlighted.
Rapid and Historic Expansion
In 2021, Africa’s tech ecosystem grew at a CAGR of 45%, which was significantly faster than the previous six years. The new record of US$5.2B raised is more than double the amount collected in the previous four years put together.
Although a rebound from the relatively slow year of 2020 was anticipated, the magnitude of the increase seen in 2021—with more than twice as many megadeals and three times as much spent as in 2019—has been unexpected.
Global Extent of Disclosure and Venture Capital Funding
Despite the impressive expansion, the survey found that Africa’s tech finance lacked transparency and that access to deal data had not much improved. While only 72% of overall investment amounts in 2020 were made public, this increased to 84% in 2021. In 2021, an additional 5 nations in Africa received venture capital funding, bringing the total to 29. In the last three years, 36 nations have funded equity tech deals worth more than US$200,000 each.
Unicorns’ Emergence Accompanied by a Decomposition of Industries
While Fintech remains a hotspot for investment and M&A activity, other industries aren’t exactly following behind. In 2021, megadeals helped propel LogisticTech and EdTech to the second and third spots in financing. Also surpassing the US$200M deal milestone were E/M/S Commerce, Enterprise, HealthTech, and Energy/CleanTech. Five more African digital unicorns will launch in 2021, raising the continent’s total to nine. All but Andela are financial technology companies, except Wave.
The increasing amount of money being invested in African digital startups is a reflection of the continent’s entrepreneurs’ groundbreaking creativity and tenacity. These patterns of investment show that financiers throughout the world are beginning to recognise Africa’s startup ecosystem for what it may become. Fintech, logistics, edtech, and health tech are just a few of the areas where we anticipate an increase in investment, which will aid in the continent’s economic and social growth.
Increases in venture capital funding from all over the world show that Africa’s IT scene is moving in a new, promising direction. The African tech start-up ecosystem is positioned to provide amazing opportunities for investors and transformative answers to Africa’s most pressing challenges as a result of the confluence of soaring capital, creative solutions, and ambitious entrepreneurs. More significant achievements, discoveries, and inspiring tales of triumph can be expected from the world’s most dynamic startup environment in the coming years.
About The Author:
Thabo Matlala is a fintech journalist with Africa Nova. A finance graduate, Thabo has an eye for exciting trends and startups disrupting the traditional South African landscape.
