Startups in Africa

2020-2021: Investments in African startups for the year were record

On April 8, 2022, a report was published according to which 2020 was a record year in terms of investments in the African ecosystem of technology startups.

In 2019, according to Partech Africa, a total of $2 billion was invested in African startups. In 2020, this figure fell to $1.43 billion. According to Briter Bridges, the total volume of venture capital investments in African startups in 2020 amounted to $1.31 billion (disclosed and undisclosed transactions), compared to $1.27 billion in 2019. Disrupt Africa noted an increase in performance from $496 million in 2019 to $700 million in 2020.

Reports say African startups raised record-smashing $4.3B to $5B in 2021

It was expected that in 2020 these indicators will increase. But in connection with the COVID-19 pandemic, which led to complete turmoil and even panic, companies reduced their staff, investors rebuilt, and during the first few months of the year, the complex verification procedure slowed down. In addition, new forecasts appeared in May: the AfricArena predicted that by the end of the year transactions would be concluded in the amount of $1.2 billion to $1.8 billion.

Investment has indeed risen, and since July, funding for venture capital firms on the continent has tended to rise through December. Although 2020 did not witness a series of grandiose deals in 2019 and did not reach the $2 billion mark, it turned out to be a good year for acquisitions. Examples of high-profile transactions were the purchase by WorldRemit of Sendwave for $500 million, the purchase by Network International of the DPO Group for $288 million and the acquisition by Stripe of Paystack for more than $200 million.

Despite the decrease in total funding, Partech claims that in 2020, African startups entered into more deals than in 2019. According to the company, 347 startups entered into 359 transactions in 2020, compared with 250 transactions in 2019. This can be explained by an increase in the number of sowing rounds (by 88% compared to 2019) and bridge rounds due to lack of funds amid the blocking caused by the pandemic.

Fintech startups attracted 24.9% of total venture capital financing in Africa, calculated by Disrupt Africa. This is followed by startups in the field of e-commerce, health, logistics and energy, respectively.

2020 year also showed that the G-4 countries dominated investment in at least two of the three reports.

In the top five of the Partech rating, the countries remained unchanged: Nigeria remained the main destination for venture investors with $307 million. Kenya was in close second place, which accounted for $304 million of the total investment on the continent. In third place was Egypt, whose startups raised $269 million, and $259 million went to startups from South Africa. Completes the top five Gang with $111 million, shifting Rwanda, which ranked fifth on the Partech list for 2019.

According to preliminary data from Disrupt Africa, in 2021, 564 African technology startups raised a little more than $2 billion, which is 206% more than in 2020. A report by Disrupt Africa shows that the average deal size has more than doubled - from more than $1.7 million in 2020 to $3.8 million in 2021.^[1]

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