Billions are pouring in: Investment in African startups is at an all-time high

One year ago, I wrote about the African ecosystem slowly but surely breaking investment records. Back then, the markets hit an all-time high of USD 701,460,565. Well, this year, the rise was incomprehensible, and the numbers vary from $2b (Disrupt Africa) to $4.6 billion (Briter Bridges), depending on the research methodology.

Focusing on the more modest evaluations accumulated by Disrupt Africa, 2021 broke the previous record by essentially doubling it. This outstanding figure tells the story of a continent shifting its narrative – from an unlucky, hopeless place to one where infrastructure gaps are becoming a fertile ground for innovation, entrepreneurialism, and investment.

Covid-19 had the immense, relentless role of including Africa and its 54 countries in the global story. It becomes increasingly evident that we must leave no one behind to move forward. In the past two years, the continent became an exciting opportunity for investors to diversify their portfolios and get the coveted impact angle while potentially banking on untapped markets of billions of potential users.

International investors stir mega-rounds

In all, 564 startups raised a combined US$2,148,517,500 in 2021, representing incredible growth. The number of funded startups grew by 42.1 per cent from 397 in 2020, and the funding total was almost treble – up 206.3 per cent from the US$701,460,565 banked the previous year.

The number of startups to secure funding has continuously increased since Disrupt Africa began publishing its annual funding report. In 2015, only 125 startups secured investment, and in 2021 it hit 568, rising by 351.2 per cent since 2015.

The amount of total funding going to African tech startups also continues to increase. When Disrupt Africa records began in 2015, the continent’s startups raised a combined US$185,785,500. The US$2,148,517,500 secured in 2021 was the first time total funding into the space passed either the US$1 billion or US$2 billion marks, representing an increase of 1056.5 per cent since 2015.

The average deal size almost doubled, increasing to US$3,809,428 from US$1,766,903 in 2020. 10 companies each raised at least $100 million in different rounds to herald a new ‘mega-round’ startup funding regime in Africa. The 11 deals they closed were worth over $1.7 billion. This was a first. Not even one startup raised over $100m in 2020, and the new figures show old and new investors raised the stakes with their biggest bets yet. Some massive investors entered the scene, helping the market reach the mega-rounds status. SoftBank, the Japanese firm whose portfolio includes Alibaba, Uber, and Nvidia, led OPay’s $400 million and Andela’s $200 million rounds. American hedge fund Tiger Global co-led Flutterwave’s $170 million raise. Stripe helped make Wave, a mobile money startup, the first unicorn from Francophone Africa. TradeDepot’s $110 million round was led by the World Bank’s International Finance Corporation, probably the continent’s most influential investor in non-fintech startups. There were at least 771 disclosed investors in African tech startups in 2021, an increase of 108.4 per cent on the 370 tracked in 2020, reflecting wider publicity and increased confidence in impressive returns.

Rwanda is rising, and fintech is king

Africa’s “big four” startup ecosystems – Nigeria, Egypt, South Africa, and Kenya – raked in a combined US$1,977,910,000 over the year, 92.1 per cent of the overall total, up from 89.2 per cent in 2020, meaning funding is becoming more concentrated, as the rest of the continent benefits from a trickle down effect. Other countries raised US$170,607,500, with 40 companies from Ghana, Morocco, and Tunisia and 64 startups from 17 additional markets securing backing. The fastest-growing startup funding destinations on the continent include Zimbabwe, Uganda, Rwanda, and Ivory Coast.

Rwanda posted growth across both metrics, with seven startups raising investment (up from four) to the tune of US$16,070,000 – up 301.8 per cent on US$4 million in 2020. With an innovation-focused government, high ease-of-doing-business ranks, stable politics, and strong local talent, the country is set to continue its upwards path.

Out of the innovation sectors, fintech continued to rule supreme with more than half the total funding. 184 fintech startups secured investment in 2021, representing 32.6 per cent of the pan-African total, 85.9 per cent rise from 99 startups in 2020, which had accounted for just less than a quarter of funded ventures. Looking closely at the numbers, 77 fintech startups raised amounts of US$1 million or larger, contributing to an average per startup of US$5,643,785, a considerable leap from US$1,619,384 in 2020. Briter Bridges, a research firm, reported that over 66 per cent of all $50m+ deals were in the sector. The growing interest in African fintech mirrors the 456 million people without a bank account across the continent, growing from 298 million in 2017. The growing statistic represents millions of families with no access to financial services and is in dire need of digital ways that could leapfrog traditional, outdated services often unavailable to them.

Ehealth ventures continue their Covid- based rise, ranking third for both funded startups and total secured capital. A total of 55 startups – 9.8 per cent of the African total – secured investment, a 34.1 per cent increase from 2020. The energy sector saw a significant rise, as the combined amount raised grew 48.1 per cent to hit US$104,118,000, accounting for 4.9 per cent of the African total.

Looking at specific products presents an interesting picture, as payment reigned supreme, and solar home kits came at a close second, according to Briter Bridges. This statistic shows the great strides that off-grid solar solutions take across the continent and their critical role in the local energy landscape.

32 acquisitions were made during 2021, a leap of 128 per cent, inserting cash and some much-needed faith into the local ecosystem.

African entrepreneurs and ventures are not looking back as local ecosystems flourish and claim their place in global industries. The rising numbers of ventures, deals, and funding paint a clear picture – the time to invest in Africa is now. With billions of potential customers, boundless needs, gaps that must be mitigated, and surging local talent, there is no doubt that next year’s article will have even higher numbers. Make sure you are a part of this revolution.

Please read the original story in The New Times

Copyright © 2022 Africa Investment Consortium. All Rights Reserved.