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.
The dominant sector for venture capital is Fintech, capturing 25% of investment amounts. It is followed by E-commerce with 14%, E-health with 10%, Logistics with 7%, and Energy with 6%. While Fintech is clearly leading, there are clear signs that other sectors are also beginning to emerge. The geographical distribution of venture capital is highly concentrated. Nigeria, Kenya, Egypt, and South Africa account for over 80% of all investments. Within these countries, a few cities attract the majority of funding, especially Lagos, Nairobi, Cairo, and Cape Town. Despite this concentration, other centres such as Accra, Dakar, Kigali, and Abidjan are also witnessing rapid growth in venture capital funding, albeit starting at a much lower level.
The largest source of African venture capital funding comes from the United States of America, accounting for 40% of total investments. This is followed by South Africa (9%), United Kingdom (8%), and Nigeria (4%). Many venture capital-backed companies are run by expat and foreign founders, not local founders. Bayen examines companies raising over $1M in venture capital: while over 50% of companies had purely local founders in Nigeria and South Africa, in other countries, such as Kenya or Ghana, less than 15% were purely local founders. Note, however, that in South Africa and Kenya, approximately one-quarter of all companies included a mix of local and expat founders. Other data sources observe similar patterns. Village Capital, for example, finds that only 10% of Fintech investment in East Africa goes to ventures with purely local founders.