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Two years in the past, the African tech ecosystem noticed newfound consideration from world gamers that translated to the continent’s finest yr of receiving enterprise capital. From various sources, it’s estimated as much as $2 billion went into African tech startups in 2019.
With high-profile visits from probably the most well-known Jacks (Ma and Dorsey), a long-awaited first IPO by e-commerce large Jumia and large $100 million rounds, it was an indication of issues to come back for African tech.
However two months into 2020, the pandemic did a wonderful job of reducing expectations as funding actions from native and worldwide traders slowed down.
It wasn’t a nasty yr, although. African startups practically raised $1.5 billion and noticed a few fascinating exits: Stripe-Paystack and WorldRemit-Sendwave.
Coming into 2021, the bullishness of African tech stakeholders returned — and why not? As companies reopened globally and the pandemic drove folks to undertake new habits in e-commerce, work, spending cash, on-line supply, and studying, enterprise capital into numerous industries was poised to extend immensely, and Africa wouldn’t be exempt.
Predictions had been made on how a lot the continent’s startups would increase in December. AfricArena, a tech ecosystem accelerator, pegged offers to shut between $2.25 billion and $2.8 billion. Stephen Deng, the co-founder and accomplice of DFS Lab, a agency that invests in digital commerce startups, serially in contrast the 2016 Southeast Asia funding panorama to the place Africa could be in 2021, at $3 billion.
These predictions weren’t totally off the mark. In the long run, info from the likes of Maxime Bayen and Briter Bridges made 2019 numbers seem like little one’s play. 2021 was when African tech reached an inflection level and took middle stage as firms raised over $4 billion (greater than they received in 2019 and 2020 mixed).
From minting 5 unicorns to witnessing extra million-dollar raises by feminine CEOs, we highlight among the occasions that formed this pivotal second in African tech.
What’s a file yr of funding with out some unicorns?
Attaining unicorn standing — a privately held firm with a valuation of $1 billion — is undoubtedly one of many vainest achievements for any startup, but it stays probably the most coveted.
In Africa, the primary two unicorns had been Jumia (in 2016) and fintech large Interswitch (in 2019). As Jumia went public on the NYSE in 2019, it ceased to be a unicorn and have become a typical billion-dollar publicly held firm.
It’s an analogous case with Egyptian funds firm Fawry. It went public on the Egyptian inventory market (the primary indigenous tech firm to take action on African soil) in 2019. Nevertheless, in contrast to Jumia, Fawry solely reached a billion-dollar valuation a yr after going public. So, it isn’t and technically wasn’t a unicorn.
Interswitch was the continent’s sole unicorn till 5 extra had been minted this yr. 4 are fintechs: Flutterwave, OPay, Wave and Chipper Money, whereas one is tech expertise market Andela.
Flutterwave received its horn in March at $1 billion; OPay in August at $2 billion; Wave and Andela the next month, at $1.7 billion and $1.5 billion, respectively; Andela in September raised at a $1.5 billion valuation; Chipper Money in November at $2 billion. In the meantime, Interswitch, the only unicorn between 2019 and 2021, is value $1 billion.
A few causes are behind this sudden surge in unicorn numbers on the continent. Extra skilled founders exist and particular markets, notably within the Huge 4 (Nigeria, South Africa, Egypt and Kenya), present a mixture of matured however nonetheless open-for-disruption traits.
Additionally, sectors akin to fintech preserve opening up in methods by no means seen earlier than and there’s a rush of overseas cash from first-time traders in early and later phases, concurrently.
Worldwide traders participated from pre-seed to Sequence E phases
Whereas world traders have beforehand invested in African startups, their exercise appeared extra outstanding in 2021, most likely due to their participation throughout the board.
As an example, traders akin to Berlin-based VC agency Goal World and famend funding agency and hedge fund Tiger World lower checks throughout early and development phases.
Goal invested in each Sequence A rounds of Kuda and Mono (together with the Sequence B spherical of the previous). The European VC additionally led the pre-seed rounds of Kippa and Edukoya. On the opposite hand, Tiger led Union54’s seed spherical, Mono’s Sequence A and later rounds in FairMoney and Flutterwave.
Different offers the place development corporations participated in early and development phases included Sequoia in Telda’s pre-seed; Wave’s Sequence A, by way of stealthy wealth administration fund Sequoia Heritage; and OPay’s Sequence C, by way of its subsidiary fund Sequoia Capital China.
There was additionally motion from different traders, akin to Dragoneer, FTX, Constancy, SVB Capital and Sam Altman, who received concerned in single giant offers for the primary time. It was routine for different corporations like Tencent because it invested within the development rounds of uLesson, Ozow and TymeBank– and SoftBank, who, by way of its Imaginative and prescient Fund 2, led two of the continent’s many nine-figure rounds in 2021: unicorns Andela and OPay.
African startups raised extra $100M+ rounds this yr than ever earlier than
OPay had one of many three nine-figure offers in 2019 after elevating a $120 million Sequence B spherical. Others included Andela’s $100 million and Interswitch’s $200 million offers. So think about the shock the next yr when no nine-figure deal happened (simply because the continent didn’t produce any unicorn).
The draught didn’t final lengthy, as Africa not solely had its highest unicorn yr but additionally recorded probably the most nine-figure rounds (11 from 10 startups) in a single yr.
Let’s begin with the unicorns: Flutterwave’s Sequence C was $170 million; OPay raised a $400 million Sequence C; Wave and Andela every picked up $200 million. Then Chipper Money did the double: a $100 million Sequence C and a $150 million extension for its unicorn spherical months later.
Others embody TymeBank’s $180 million Sequence B, Jumo and MNT-Halan’s $120 million rounds, TradeDepot’s $110 million and MFS Africa’s $100 million.
The one non-fintech offers had been Andela and TradeDepot (though the latter has an embedded finance play). Additionally, all however two offers had been solely equity-based: TradeDepot and MFS Africa raised a mixture of fairness and debt.
A handful of native acquisitions and a monumental exit
Digital funds gateway MFS Africa is considered one of Africa’s few company traders and acquirers. Over the previous 5 years, the corporate has made strategic bets throughout ignored startup areas in Africa, investing in Julaya, Maviance and Numida. And by way of acquisitions, Beyonic and, most just lately, Baxi.
Final yr, the pattern of seeing native firms purchase one another performed out and continued into 2021. Some fascinating acquisitions embody TLcom-backed Kenyan client expertise platform Ajua shopping for WayaWaya; Nigerian bus reserving and Techstars-backed Treepz increasing into Ghana and Ugabus after getting Stabus and Ugabus; and Flutterwave making a foray into the creator economic system house with the Disha acquisition.
Others embody Jiji’s acquisition of Cars45, Egypt’s B2B e-commerce platform MaxAB buying YC-backed Waystocap, thus increasing into Morocco, and Cheki promoting its companies in Kenya and Uganda to Nigeria’s Autochek.
Just like the MFS Africa-Baxi deal — which each events claimed to be the second-largest fintech acquisition in Africa after Stripe-Paystack — the opposite acquisitions listed had been undisclosed.
Why African startups don’t disclose their acquisition determine is a subject for one more day. Personally, reporting such offers might not be interesting going ahead (if they continue to be undisclosed) until they contain worldwide enlargement performs. Living proof: Nigerian healthtech Helium Well being buying UAE’s Meddy (the primary of its sort between sub-Saharan Africa and the GCC) and Australian BNPL participant Zip shopping for up South Africa’s PayFlex.
And worldwide enlargement by way of acquisition will get extra thrilling when a determine is connected; as an example, knowledge middle Equinix introduced that it could purchase Nigeria’s MainOne, for $320 million. The information was the spotlight for this yr’s acquisition offers, not just for its measurement but additionally as a result of MainOne is a female-led firm, with Funke Opeke as its CEO.
Extra female-led startups raised million-dollar rounds
Funke Opeke is among the only a few founders to have come this far: operating an African tech firm to the purpose of exit. She’s additionally most likely the one feminine founder on the continent to have raised 9 figures cumulatively for her enterprise.
Opeke’s expertise is an outlier. In Africa and globally, funding doesn’t come simple for female-led firms. A report by Briter Bridges from the center of this yr checked out 1,100+ firms to have obtained VC cash between 2013 and Could 2021 (pegged at $20 million or much less).
Per the report, solely 3% of the $1.7 billion raised inside this era went to all-female founding groups in comparison with 76% for all-male groups.
So, it’s nice information when female-led startups increase 1,000,000 {dollars} or extra in Africa. And it not directly contributes to how effectively the area performs, as we are able to attest to this yr which recorded greater than ten offers, signalling an enchancment in VCs (each gender-focused and gender-agnostic) sourcing for female-led groups to put money into.
The feminine-led startups that raised 1,000,000 {dollars} or extra this yr embody Shuttlers, Bankly, Lami, Okra, Klasha, Akiba Digital, Ejara, Kwara, Edukoya, Reelfruit and Jetstream.
Native traders — and founders — stepped up their recreation
Alitheia IDF is an investor in Reelfruit and Jetstream. The ladies-focused agency, led by principal companions Tokunboh Ishmael and Polo Leteka, is a $100 million personal fairness fund for gender-diverse companies in Africa.
It’s additionally one of many native funds that raised big sums of cash this yr to put in writing checks for African startups throughout completely different phases. Others embody Ventures Platform, LoftyInc Capital, Voltron Capital and 4DX Ventures, all sub-Saharan-based VC corporations with a pan-African technique.
Up north, traders akin to Sawari Ventures and Algebra Ventures pulled their weight backing startups, notably in Egypt, the place startup innovation and funding has taken off astronomically.
Native and Africa-focused traders additionally took up whole seed to Sequence A rounds of some firms in sub-Saharan Africa (Appzone, Payhippo, to call a number of), which hardly ever occurred in earlier years. Future Africa, Kepple Africa, Launch Africa, and others continued with their tempo from 2020 and wrote many new and follow-on checks this yr.
We even seen how lively founders like Flutterwave CEO Olugbenga’ GB’ Agboola, Paystack founders Shola Akinlade and Ezra Olubi, and Chipper Money founders Ham Serunjogi and Maijid Moujaled took half in some early-stage rounds too.
Nigeria grew to become the unicorn capital; Egypt, a powerhouse
In November 2019, three fintech firms, Interswitch, OPay and PalmPay, raised a cumulative $360 million from American and Chinese language traders. That introduced Nigeria as Africa’s unofficial capital for fintech funding and digital finance startups.
Fintech alternative in Nigeria is the most important on the continent. With over 40% of Nigerian adults having financial institution accounts and digital funds hitting greater than $250 billion in 2019, it’s no shock that the startups facilitating transactions for the unbanked (OPay) and offering gateways (Interswitch and Flutterwave) are actually value greater than $1 billion.
The three firms, together with Andela, began operations in Nigeria’s business metropolis, Lagos, incomes Nigeria the standing of Africa’s unicorn capital in 2021.
For a very long time, Nigeria has been one of many three international locations that obtain the majority of native and worldwide enterprise capital, together with Kenya and South Africa. The three international locations current Africa’s most related populace and rising economic system; the right surroundings to draw overseas capital earlier than others.
However then Egypt stepped into the image in 2017, and with time, the North African nation grew to become a part of the “Huge 4” because the nation started attracting enterprise capital eyeballs. And after quietly spending the final couple of years on the rear, Egypt picked up impressively in 2020 and this yr surpassed Kenya to turn into the area’s third most lively funding area.
As this report aptly put: “Seemingly from nowhere, Egypt is abruptly on the radar as a key African startup funding vacation spot, highlighting the prospects for continental development of the nascent sector.”
Egypt additionally has bragging rights in producing the primary SPAC deal on the continent. In July, Cairo and Dubai-based ridesharing firm Swvl introduced that it was going public by way of a merger with Queen’s Gambit Development Capital. It’s a deal that can worth Swvl, one of many nation’s success tales, at nearly $1.5 billion as soon as accomplished.
With a big inhabitants and spectacular GDP per capita, the North African nation raised nearly $600 million this yr. Whereas it’s lower than what Nigeria and South Africa raised at over $1.4 billion and $830 million, respectively, some observers predict that Egypt will surpass South Africa by subsequent yr if it retains up with its tempo.
There are a number of causes behind this pondering. In Nigeria, South Africa and Kenya, fintech is the sector that receives probably the most funding. The key sector is e-commerce and retail in Egypt, however the nation is a sizzling spot for fintech, too, evident in holding the best pre-seed rounds in each classes (Rabbit’s $11 million and Telda’s $5 million rounds).
After I wrote this piece earlier this yr, the most important pre-seed spherical on the time was Autochek’s $3.4 million. Rabbit’s eight-figure pre-seed is thrice that quantity. Sources just lately informed TechCrunch that one other Egyptian startup will shut a pre-seed spherical that top subsequent yr.
Mindblowing pre-seed investments like these are one of many many indicators of how briskly enterprise capital has picked up in Africa. The continent’s startups raised over $4 billion this yr and minted 5 unicorns. Nobody is aware of what to anticipate in 2022, however there’s a nuanced sanguinity that we might see “extra of every thing” together with some IPOs (I could be reaching right here) so brace yourselves.
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