After the bad year 2020, venture capital funding for African start-ups is expected to rebound to a record between $ 2.25 and $ 2.8 billion, according to the study “The Sate of Tech in Africa” by African innovation accelerator AfricArena based on data from Partech Research.
Unsurprisingly, the venture capital market in Africa shrank in 2020 with a 29% drop in total deal value to $ 1.4283 billion. However, this decrease in the value of equity and that of the average amount per transaction should not hide the increase in the number of transactions, plus 44%.
Nigeria and Kenya lead in venture capital investments in Africa with respectively $ 307 million and $ 305 million raised in 2020. They are followed by Egypt ($ 269 million) then South Africa ($ 259 million) . These four countries capture nearly 90% of venture capital funding. Rwanda has positioned itself as a hub for East Africa and has been very successful with $ 126 million raised in 2019 but the Covid-19 pandemic halted its progress with a 91% drop in funding at just $ 11.6 million last year. Note that Ghana made strong progress in 2020 obtaining around 8% of funding. However, more countries have benefited from funding (26 against 19 countries in 2019), this is particularly true of certain West African countries such as Benin.
Venture capital investment in start-ups in Africa
Agritech’s “phenomenal” growth
If Fintech is still holding the rope by capturing around a quarter of equity financing in 2020 ($ 356 million) with Nigeria in the lead, Agritech has experienced “phenomenal” growth, observes AfricAera. And it is Kenya which was the big beneficiary with funding of $ 85 million in favor of Gro Intelligence but also Twiga Foods and Apollo Agriculture (See table below).
Agritech became the second sector of concentration in 2020 with $ 179 million. Will this improvement continue in 2021? For AfricAera “ What we can determine from the investment data for 2020 is that investors continue to see great potential in African agriculture – which is a major employer and a key sector for addressing food security. world ”.
Start-ups also respond to the main challenges facing farmers, whether in the areas of market access, insurance, financing and knowledge, or even increasing yields. AfricAera takes the example of the Ghanaian start-up Agrocenta which provides solutions throughout the value chain with an online sales platform (“CropChain”), the “TrucKR” solution to ensure product logistics , the “Lendts” solution for financing supplemented by mobile payments (AgroPay). Agrocenta has received total funding of $ 2.2 million.
AfricAera also believes that the collection and use of data (AI) will be very useful in increasing the knowledge and productivity of farmers but also in mitigating risks.
If venture capital investments for African start-ups should be recorded in 2021 and sharply increase in the following years to exceed $ 10 billion by 2025, it should be remembered that compared to other regions of the world, Africa is underperforming. Thus, while investments amounted to an average of $ 3.9 million per day in African startups in 2020, they reached $ 428 million per day in the United States.