In the year 2020 alone, African startups raked in well over $700 million in investments; the highest ever recorded. The startup scene promises an exciting future in a continent that is ripe with opportunities for exponential growth.
Different data providers estimate different amounts, due to alternative definitions and data sources. Estimates for the amount of venture capital invested in Africa range from $700M to $1.4B for 2020. Importantly, all data sources show a clear upward trend, with 2020 amounts representing a three- to fivefold increase over 2015 amounts.
The ecosystem is mainly dominated by fintech companies which continue to attract the most investments followed keenly by agriculture, health and cleantech sectors. The flow of significant funding into fintech has seen a number of African startups hit unicorn status; the most recent of them being Chipper Cash. The San Francisco-based payment platform is the fastest African startup to hit the prestigious $1 billion valuation doing so in just 3 years.
Earlier last year, Flutterwave had also raised $170 million in series C funding, setting them comfortably in the $1 billion league with the likes of Interswitch and Jumia. This shows an increasing boost in investor confidence in the continent as more VCs are willing to bet big bucks even on early-stage African startups. Acquisitions on the continent are also ramping up significantly. Stripe’s $200 million acquisition of Paystack was the most talked about in 2020. Ghanaian fintech Zeepay’s acquisition of Mangwee Mobile Money in Zambia also points out to the fact that local fintechs are moving to secure their dominance even within other African countries.
Aside the older and more established companies in the ecosystem, new entrants like MEST backed Nvoicia and Y Combinator backed Float are challenging traditional credit and lending systems by providing businesses with much-needed funds to keep operations moving without requesting collateral. Other startups are also gaining firm grounds in investments, insurance technology, cryptocurrency and stock trading.
Companies like Cowrywise in Nigeria are encouraging more people to invest through technology whereas other fintechs are setting their eyes on markets outside Africa. Chipper Cash after its recent series C funding is rapidly expanding its payment product to the UK and USA. The growth these products provide the ecosystem are inevitable especially as Africa’s youthful population look for more ways to establish financial freedom for themselves. Mpharma is another tech company that has a strong presence in the health industry. Their value proposition is to provide cheap and accessible medication to the sick especially during the pandemic.
The African tech ecosystem is still in its infancy and will constantly evolve. With incubation programmes like MEST and community networks like Venture for Africa, there is an assurance that more and more startups will be created to bring the needed solutions to the sea of problems Africans face. The future of the ecosystem looks increasingly positive and what we would be particularly interested to see is which startups can scale up and possibly give investors handsome exits whilst solving the continent’s most pressing challenges.