The exact amount raised by African startups from venture capital funding in 2019 continues to be an object of controversy. While this report by WeeTracker shows startups in Africa raised $1.3 billion in VC funding in 2019, another report from Partech Africa says 243 African tech startups raised a total of US$2.02 billion in 2019. Added to the growing list of reports (which, by the way, have unanimously established that startups in Africa did cross the $1bn mark in VC funding in 2019) is this newest report from the association that unites all private equity and venture capital organisations in Africa, African Private Equity and Venture Capital Association. The association’s latest report says about $1.4bn was invested in VC deals in Africa in 2019 across 139 deals — double the value of 2018.
Here Is What You Need To Know
- This report is so significant because it is AVCA’s first VC report — Venture Capital in Africa: Mapping Africa’s Start-up Investment Landscape — and would definitely serve as one of the most reliable voices on VC funding data on the African startup scene, going forward.
What Sectors Are Investors Preferring More?
- The report noted that fintech and IT deals dominated the African startup scene accounting for 19% of the total volume of VC deals done between 2014 and 2019.
- Both sectors were followed by consumer discretionary (18%) and industrials (12%), while communications services, healthcare and consumer staples collectively account for just 19% of the volume of VC deals over the same period.
Which Countries Are Receiving The Most Investments?
- According to AVCA’s report, venture capital companies are investing more in Southern Africa, with the region attracting the highest volume of VC deals at 25%, followed by East Africa (23%) and West Africa (21%), while multi-region deals attracted the largest share by value.
- South Africa’s well-developed VC ecosystem accounted for 21% of deals between 2014 and 2019, closely followed by Kenya (18%) and Nigeria (14%)
Here is a major indictment on the African startup ecosystem according to the report:
- Even though all the startups that raised between 2014–2019 have their operational base in Africa, about one fifth (21%) of the total number of VC deals between 2014 and 2019 were in companies headquartered outside of Africa.
- The report however noted that these early-stage companies with their headquarters outside Africa raised money to expand in Africa or further strengthen their African presence. Of these companies with headquarters outside Africa, the majority (53%) are based in the United States.
At Which Stage Of The Startups’ Development Are The Investors Investing More?
- According to the report, investors are investing more at the seed stage of a startup than at other stages.
- According to the report, nearly one third (32%) of the total number of early-stage investments reported in Africa between 2014 and 2019 were seed stage deals. These deals, however, accounted for only 5% of the total deal value, showing that while more investors were investing at the seed stage than at any other stages, they weren’t pouring in more in monetary sums into the startups compared to the amount invested at other stages.
- Series A and Series B transactions together accounted for 29% of the total volume, and 38% of the total value of early stage deals.
- The report also stated that there is a large number of deals in which the funding series are unknown, representing 34% and 29% of the total volume and value of total deals reported.
- Another interesting fact from the report is that almost two-thirds (65%) of the total number of all VC deals in Africa between 2014 and 2019 were below US$5mn in size, while a quarter (25%) were between US$5mn and US$20mn in size.
- Just 3% of the total volume of VC deals reported from 2014 to 2019 were above US$50mn in size.
Where Did The Investors Come From?
For the first time, the report mapped comprehensively where VC investors to the African startup scene came from.
- Quite alarming is the fact, according to the report, that North American investors represented 42% of the total number of investors that participated in VC investments on the continent between 2014 and 2019, followed by European based investors at 23%.
- African based investors accounted for 20%, followed by Asia-Pacific (8%) and investors based in the Middle East (6%). This, perhaps, shows why the continent lags behind other continents in terms of funding available to its startups ecosystem.
- The report also noted that a majority of the investors that took part in VC deals on the continent between 2014 and 2019 were US-based, representing 40%. South Africa (9%), Nigeria (4%) and Egypt (2%), which also constitute three of the most prominent VC hubs in Africa, were within the top 10 countries where investors that participated in VC deals on the continent from 2014 to 2019 are based, the reported noted.
- The report also noted the growing interest from Middle East based investors on the African VC landscape. The United Arab Emirates, it noted, was amongst the top 10 countries where investors that participated in VC deals in Africa from 2014 to 2019 are based, representing 3% of the total number of investors.
- Finally, the report noted that PE/VC Fund Managers (i.e. firms that have raised, or are currently raising, third-party PE/ VC funds from institutional investors), represented 39% of the total number of investors that participated in VC deals reported in Africa between 2014 and 2019, more than incubators, accelerators, non-profit organisation, family office, government agency, financial institutions or others.
The full report can be accessed by clicking here.