2021 African start-up funding leaps 2,5 times

Venture Capital Funding for African start-ups leapfrogged in 2021 as it grew 2,5 times from the 2020 outturn, flying through the roof to set a new annual record, the latest Briter Bridges’ Africa Investment Report 2021 shows.

According to the report, Venture Capital (VC) firms invested around US$5 billion in 2021, the equivalent to the combined African start-up inflows recorded in 2018, 2019, and 2020.

Briter Bridges pegged the total 2020 venture capital for African start-ups at US$1,31 billion up from US$1,27 billion in 2019.

While start-up funding has increased steadily over the years, 2021 upset the trend as it soared to new heights in both volume and value of transactions sealed.

The report recorded over 740 announced deals, a surge of over 2,5 times from the 2019 aggregate.

Notably, US$3,1 billion in new funds were announced since 2019.

Over 40 African start-ups raised over US$50 million each with 175 start-ups generating between US$5 million and US$49 million, establishing new records in both categories.

300 firms generated between US$500 000 and US$5 million in funding while over 900 start-ups secured up to US$500 000.

About 62% (approximately US$2,9 billion) of the aggregate figure went to fintech, doubling the 31% recorded in 2020. Remarkably, two-thirds of all US$50m+ deals are in fintech.

The trend remains true even when factoring out deals above $50 million — fintechs still capture over 40% of total investment value. With a great need to close the financial inclusion gap on the continent, fintech could retain the top spot for investment in Africa for the next half a decade.

Healthtech and Biotech trailed at 8%, with logistics (7%), education (5%), and cleantech (5%) rounding up the top five sectors by investment value.

Last year blazed a new trail as it saw the highest number of deals surpassing the $100 million mark in funding across Africa. There were 12 deals worth at least $100 million, accounting for $1,9 billion of the total funding value.

No African start-up raised $100 million in 2020 except for the acquisitions of Paystack and Sendwave.

“It's not every day that you hear people claiming hundred million dollar business opportunities in Africa. Yet, after a gradual increase over the past few years, 2021 saw the highest number of single, non-M&A deals above US$700 million. Although highly concentrated in a few cases, only representing less than 3% of total disclosed, announced deals, yet capturing over 55% of total disclosed funding, this investment size carries significant weight and acts as a pull factor for several investors,” noted the report.

Some startups that raised at least $100 million include Andela, $200 million Series E; Flutterwave, $170 million Series C; Chipper Cash, $250 million Series C across two separate rounds; OPay, $400 million Series C; Trade Depot, $110 million Series B; and Jumo, $400 million led by Fidelity Management & Research Company.

The report compiled by engaging over 60 funds focused on Africa highlights; the majority of the deals were from Nigeria, Kenya, South Africa and Egypt with the highest valued deal coming from Nigeria. Africa’s titillating market of over 1,2 billion people is proving to be a new horizon for a multitude of tech services like electronic payments, agriculture, insurance, credit, software engineering, and e-commerce among others with projections; Africa’s population will more than double to 2,5 billion by 2050.

This has bolstered optimistic investors, among them the biggest names in the world of venture capital funding, who see an avalanche of opportunities on the continent despite its low levels of technology infrastructure, limited consumer spending, and the instability brought about by numerous conflicts and political unrests.