- Nigeria, South Africa, Egypt and Kenya are still the hotspots for African VC investment
- The geographical reach of VC funding has increased to a total 29 African countries, up from 26 countries in 2020
- Nigeria is now the leader in the Africa tech VC ecosystem, pulling ahead on both funding amount and number of equity rounds
New data released this week shows that African tech start-ups recorded increased funding in 2021 manifested in signed deals that are three times higher than the previous year.
The deals make the continent’s tech startups ecosystem the fastest growing in the world.
In 2021, average round sizes across all stages rebounded back to above their 2020 levels, with strong recovery and continued growth across all Venture Capital (VC)- a form of private equity financing that is provided by venture capital firms or funds to startups, early-stage, and emerging companies; market segments in Africa.
The increase in average round size was mainly due to the growing number of both local and international investors looking to support African tech companies.
681 equity rounds raised by 640 start-ups
According to a report published by Partech, an investment platform for tech and digital companies in 2021, 640 African tech start-ups raised a total of US$5.2B across 681 equity rounds. This is 3.6 times YoY growth that makes Africa tech VC-; the world’s fastest-growing ecosystem.
In 2021, Partech tracked a total of 681 equity rounds raised by 640 start-ups. This is a 92 per cent increase in growth YoY compared to the 359 rounds raised by 347 start-ups in 2020.
However, 73 per cent of total funding went to the top 4 countries, with half of it going to Nigeria alone. According to the latest report, in equity funding, the West African country took 1.8 billion which is 34 per cent of the total. Nigeria recorded 185 equity deals representing 27 per cent of all deals.
“Nigeria is now playing in its own league, but Egypt, South Africa and Kenya also attracted more than half a billion each,” stated the report on financing tech startups.
“Senegal completes the top 5 as francophone Africa accelerates 2.6 times faster than the continent, at 695 per cent YoY growth in the amount invested.”
Nigeria is now the leader in the Africa tech VC ecosystem, pulling ahead on both funding amount and number of equity rounds. The report shows US$1.8B was invested in Nigeria in 2021, 34 per cent of all African equity funding. With 185 equity deals accounting for 27 per cent of the continental total, Nigeria is far ahead of other African countries.
The report on investment in African tech start-ups shows that Nigeria, South Africa, Egypt and Kenya are still the hotspots for African VC investment. However, despite megadeals being largely localized to these four countries, their contribution to the total volume invested is decreasing, and in 2021 stood at 73 per cent.
Deals recorded in Africa almost doubled
“Senegal reached the top 5 for the first time. With US$353M raised, Senegal is trailed by Ghana, at US$167M. The two are now the key outsiders looking to catch up with the leading quartet,” noted the report authors.
Last year, the number of deals recorded in Africa almost doubled, increasing by 92 per cent YoY. According to Partech, this rate of growth makes African tech one of the fastest-growing ecosystems in the world.” In 2021, it accelerated significantly, far outstrip- ping the past 6 years’ growth with a CAGR of 45 per cent.” Partech revealed.
The report notes, 681 equity rounds above US$200K sets a new record adding this signals a super-active ecosystem, where almost 3 deals are closed every weekday. The number of deals almost doubled, increasing by 92 per cent YoY.
This rate of growth makes African tech one of the fastest-growing ecosystems in the world. In 2021, it accelerated significantly, far outstripping the past 6 years’ growth with a Compound Annual Growth Rate CAGR of 45 per cent -CAGR is one of the most accurate ways to calculate and determine returns for anything that can rise or fall in value over time.
In almost every year of reporting on Africa tech VC, a new record has been set. But US$5.2B is a truly extraordinary milestone. It’s more than the total amount raised in the last 4 years combined, revealed the report authors indicating 2021 was one of the best performing year for African techies.
The Africa Tech Venture Capital report further said: “It’s clear that large rounds and megadeals are back, after a complete pause in 2020. In 2020, there were only two rounds recorded above US$50M; in 2021 there were 21, almost 10 times more than the year before.” According to the report, the amount invested in this bracket increased 21 times.
“A bounce-back isn’t surprising after a year as quiet as 2020,” Partech explained adding that even compared against 2019 when these megadeals first started gathering pace in Africa, 2021 saw more than double the number of megadeals and 3 times the amount invested.
However, this report is not exhaustive. Its authors say its goal is to provide a picture of the current state of the Africa tech VC ecosystem and map how it evolves over time.
The continent’s tech finance transparency is lacking. “We’ve said before that we hope to see more transparency in the ecosystem, as we believe it drives positive impacts for both investors and entrepreneurs,” noted the Tech startup report authors.
The 2021 Venture Capital report notes trends from 2019-2021 are disappointing in this regard: there has been no strong improvement in access to deal data and no recovery from a sharp drop in the number of fully disclosed deals in 2020.
The geographical reach of VC funding
However, 85 per cent of the total amount invested in 2021 was fully disclosed. This is an increase from 72 per cent in 2020 and suggests that it is the growing number of seed rounds that are being kept confidential, as opposed to larger rounds.
The geographical reach of VC funding has increased to a total 29 African countries, up from 26 countries in 2020. This brings the total number of countries having raised an equity tech deal above US$200K over the last 3 years to 36.
Meanwhile, Fintech sector is increasingly attracting both funding and deals. Other sectors are also booming. LogisticTech came in at number 2, with slightly under US$400M, while EdTech took the number 3 spot with around US$300M. Both benefited from megadeals in 2021, growing by 5 times and 7.5 times YoY respectively.
According to Partech, other most-funded sectors were E/M/S Commerce at number 4, Enterprise at number 5, HealthTech at number 6 and Energy/CleanTech at number 7. All reached the milestone of deals closed above the US$200M level.
Africa produced 5 new unicorns in 2021
The 2021 report revealed there are now a total of 9 tech unicorns in Africa. All were born in the last 30 months, with 5 new companies added in the last 12. The 5 new unicorns in 2021 were Flutterwave, Opay, Wave, Andela and Chipper Cash. With the exception of Andela, all are Fintechs.
They are also all based in Nigeria, except Wave. Wave, based in Senegal, became the first unicorn in Francophone Africa when it raised a US$200M Series A round –the largest Series A ever announced on the continent.