How strong is the African tech startup ecosystem at present?

How strong is the African tech startup ecosystem at present?

The 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. Currently, 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 that have been 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 the start-ups and funding has increased. The average round size of the investments has increased for the 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. 

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Equity rounds are increasing in Africa 

In 2021, 640 African tech start-ups have done increasing 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 the equity is 92% in comparison 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 extremely well in Nigeria and it has been successfully able to 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. 

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Partech while commenting on the improvement of the deal size in Africa 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 is not very surprising though. 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 in Africa. The seed rounds are kept secret, however, the large rounds that 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 too 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. 

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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 nice year for the African ecosystem and 2022 will be a great year for the African ecosystem too based on the current trend.

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