African start-up funding gains more traction

THIS February, South Africa’s only fully digital bank,

TymeBank secured a US$110 million investment from Apis

Growth Fund II, luring new investors from the United

Kingdom and Philippines. Now just two years old, TymeBank boasts of 2,8 million customers and is one of the fastestgrowing fintechs globally, onboarding an average of 110 000 new customers per month.

Tymebank’s funding serves as an exhibit of the growth in venture capital funding African start-ups have enjoyed in recent years. According to Africa-focused fund Partech Africa, African startups generated a scanty US$400 million in 2015 compared to the $2 billion that came into the continent in 2019. Varying reports by different research institutions indicate a general surge in start-up funding for 2020 despite a Covid-19 induced global economic downturn. Researchers at Briter Bridges pegged the total 2020 venture capital for African startups at US$1,31 billion up from US$1,27 billion in 2019. Disrupt Africa figures show: 397 startups raised US$701,5 million in 2020, a 27% increase in the number of startups and a 43% surge from US$400 million in 2019

Partech hinged its stats on equity deals greater than US$200 000 while Briter Bridges employed a similar scheme, opting not to use geography to define African startups. Disrupt Africa focused on the startups that are seven years or less in operation.

A cross-section of the sealed deals indicates; fintech dominated the apex funding pacts in Africa, both in the number and scale in 2020. Briter research stats show the sector’s funding rounds amounted to roughly US$1,33 billion with milestone deals like the Paystack and DPO acquisition.

However, there is also a remarked growth in e-commerce, e-health, logistics, energy, recruitment and HR, transport, and agri-tech. Notably, the majority of the deals were from Nigeria while the highest valued deal was from Kenya. Nation by nation, Kenya, Nigeria, and South Africa dominated the top deals, while Egypt’s Vezeeta featured on the pinnacle list.

Further analysis of the figures shows: Kenya-based Payments firm DPO Group led the deals in 2020, ensuing Network International’s US$288 million acquisition. The acquisition will allow the DPO Group to penetrate the Middle East Market and add Point of Sale systems to its product portfolio while allowing Network International to use the DPO’s 47 000 active traders in 19 African countries to facilitate mobile payments in Africa.

Stripe acquired Nigeria’s Payments provider Paystack for US$200 million, making it one of Nigeria’s biggest acquisition deals while South Africa’s open-access fibre optic connectivity provider raised US$97,6 million from Africa Infrastructure Investment Managers (AIIM) to finance expansion. Egyptian Healthtech raised US$40 million from Gulf Capital and Saudi Technology Ventures in a Series D funding round. Among the top 10 2020 deals were Lumo Global and Synamo, which raised US$30 million each, as well as Lumo and Flutterwave which raised US$35 million apiece — players in the digital space, solar, and fintech arenas.

At least 24 other countries received investments outside the Big Four this year- according to Partech data. Zimbabwe’s NeedEnergy, an energy tech startup closed its US$100 000 seed round of funding, from angel investors to heighten their business operations. In 2019, a Zimbabwean fintech startup, Payitup secured US$13 million in investor funding from the UK-based Thawer Fund Management.

A jog down memory lane would reveal; Silicon Valley received huge state funding following WWII and received substantial regulatory advantages which boosted the now glorious establishment. A more deliberate and intentional approach is imperative for Africa to create a stable and more fluid venture capital value chain. Several Latin American countries have taken the initiative in this regard.

Africa has more than 600 tech hubs and rising, ranging from incubators and accelerators to co-working sites Kenya, Nigeria, Egypt, and Morocco accounting for the highest concentration — according to Global Systems for Mobile Communication Association (GSMA). The fastest-growing ecosystems in Africa, based on the number of tech hubs created per year, are the DRC, Zambia, Côte d’Ivoire, Togo, and Nigeria.

Mabunda is an analyst and TV anchor at Equity Axis, a leading financial research firm in Zimbabwe. — ebenm@equityaxis.