State of Africa VC investing in 2018

1. Upward funding trend

In 2017, $560m was invested into African startups by VCs focused on African markets. It was a 53% increase compared to 2016, 2x the funding amount of 2015 and 14x the fundraise amount in 2012.

$168m was deployed into 120 African startups in H1 with about 24% of those startups raised over $1m. Incubators and accelerator programs are doing good to support the ecosystem, contributing to 27 deals in H1 2018.

There’s an increase in dollars into the ecosystem, especially at the seed round. However, international VCs with larger fund size are looking to invest in startups with proven business models, product-market fit and the potential to expand to other markets, with the hope of participating in their Series A. Orange Digital Ventures, Partech and TLcom Capital to mention a few have all in the last eight months deployed dollars to startups raising their post Seed rounds

For founders looking to raise a pre-seed, seed round, incubators and accelerator programs and local VCs such as Ventures Platform, Microtraction, GreenHouse Cap are a sure bet.

2. Other markets trending upwards behind Nigeria, Kenya and South Africa

In 2017, South Africa and Nigeria received more venture capital dollars than all other regions. While it’s unlikely that no other city will overtake these two cities in the next few years, the private market is growing and more countries such as Rwanda, Ghana, Senegal and Uganda will begin to see more venture capital dollars as a result of new funds like Sobek Capital, launching in Rwanda

3. Investment scope still fintech concentrated

In 2017, one in three fund raises in Africa went to a fintech startup [Link]. In 2018, four of the top 10 deals went to fintech companies. The concentration on fintech startups is an obvious realisation by investors on the inherent potential in the financial services space that are yet to be explored. Fintechs have the job to create ecosystems and infrastructure that has not been previously built.

In H1 2018, there were 25 fintech deals with $95m deployed to those deals. Out of the top 10 highest raise, 4 of them were fintech deals raising a total $48m. In all, African fintech startups have raised in excess of $200m since 2016.

4. Growing number of local pre-seed funds and VCs

Local tech hubs are developing from just co-working spaces to having dollars to back founders. Government participation has also seen some increase and recently, the Rwandan government launched a $30m fund for tech startups. The French government announced a $76m fund, to support local accelerators, hubs, incubators and coding programs. There is also a growing eco-system for pre-seed/seed funds in Nigeria (microtraction, Ventures Platform, Growth by CcHub) and more than ever, startups are exploring this path.

Sources: Weetracker, Techpoint, Partech Ventures

I hope this post was helpful. If you would like to discuss further, feel free to get in touch with me oluwoleoyekanmi [at] gmail.com

Thanks to Raquel Wilson for reviewing

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