Internet penetration has increased and with the increased penetration of the internet, the startup ecosystem has also flourished. Currently, the African hotspots for the start-up ecosystem are Kenya, Nigeria, Egypt, and South Africa. Today, Africa is able to pick a lot of funds with the help of VC investment. The geographic reach was 26 countries in Africa and it has increased to 28 countries in the current year.
Back in 2021, Africa earned a lot of investment in comparison to the previous years. In fact, African start-ups are picking so much investment that it can be said that the start-up ecosystem of Africa is one of the fastest-growing start-up ecosystems in the world. In 2021, the investment funds picked through Venture Capital were back to 2020 levels and were a lot better than in 2020 indicating that the continent is experiencing high growth and strong revenue, and the Love Status between start-ups and funding has increased. The average round size of the investments has increased for African start-ups and this can be attributed to the fact that both local and international investors are looking forward to supporting African start-ups.
Equity rounds are increasing in Africa
In 2021, 640 African tech start-ups have done increasingly well. For instance, 640 tech start-ups in Africa have raised an amount of US $5.2 billion in a total of 681 equity rounds. This makes Africa one of the world’s fastest-growing ecosystems. The growth rate in the money raised through equity is 92% in comparison to 2020.
The hotspots of the African ecosystem currently are Nigeria, South Africa, Kenya, and Egypt. 73% of the funding in Africa has gone to these four countries. In fact, Nigeria has alone picked up more than half of the investment. A total number of 185 equity deals have currently taken place in Nigeria. The country is forming its own league. However, other countries like Kenya, Egypt, and South Africa are also doing well in financing their tech start-ups.
The African tech VC ecosystem is currently very active in Nigeria and it has been able to successfully pull both funding money and equity rounds. It can be safely said that Nigeria is currently doing extremely well in comparison to other African countries. Currently, Nigeria has managed to earn 34% of all the African equity funding and 27% of the continental funding.
Commenting on the improvement of the deal size in Africa, global investment platform Partech has said that there was a quiet in 2020 and it presented a very Sad Status for the start-ups but a bounce-back is here right now and this does not come as a surprise. Last year, African countries experienced plenty of megadeals and it is gaining pace in Africa for all the right reasons.
Which sectors in Africa are blooming?
In Africa, the reach of VC funding has increased from 26 countries in 2020 to 29 countries. The seed rounds are kept secret, however, the large rounds have been announced. Most of the start-ups that are able to attract VC funding belong to the fintech sector. Along with fintech startups, other sectors are also booming and this includes logistic tech start-ups and ed-tech start-ups.
In 2021, the African continent produced five tech unicorns. Currently, a total of nine tech unicorns are present in Africa. The five new unicorns of Africa in 2021 are Chipper Cash, Andela, Wave, Opay and Flutterwave. It is not surprising that apart from Andela, all other startups are fintech start-ups. Interestingly, apart from Wave, all the start-ups belong to Nigeria. According to another report released by StartupBlink Ecosystem Index Report 2021, the five African countries that have the most developed startup ecosystem are South Africa, Kenya, Nigeria, and Rwanda. In terms of the city, Lagos is the most developed African city for start-ups, followed by Nairobi.
Currently, the future of African start-ups along with the investment is extremely positive. There was a mild setback during the pandemic but the recovery has been strong for Africa. 2021 proved to be a good year for the African ecosystem and 2022 will be a better year for the African ecosystem too based on the current trend.
