Connecting Africa is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 3099067.

Investment

Tech Startup Funding In Africa: 2018 Hits Record High

Article Image
Africa's tech startup scene has been on an upward trajectory for the past few years, with the amount of funding flooding into the sector one of the main ways of tracking this trend.

The aggregate value of the investments flowing into the sector has been growing exponentially year on year. In 2018, according to the recent African Tech Startups Funding Report released by Disrupt Africa, the number of African tech startups that raised funding increased by 32% to 210, and the total amount raised jumped by a whopping 71.5% to the record annual figure of US$334.5 million.

Indeed, the total amount of money raised by African startups per year has grown by more than 50% since Disrupt Africa started tracking investments in 2015. And investor faith in the sector is further demonstrated by the fact companies are raising larger amounts of funding, with the average amount secured in 2018 a record $1.6 million.

"There are more funds at various stages with capital to deploy, so the market is getting a little more mature. There's still a lot of work to be done but it's a good indicator or proxy of progress," says Yele Bademosi, director of cryptocurrency and blockchain VC vehicle Binance Labs, and founder of Nigerian early-stage investments fund Microtraction.

Nigeria steams ahead
Where this increasing amount of funding is being channelled, however, remains a moveable feast. South Africa has led the way during the past few years, only knocked off the top in terms of total funding in 2018 by a mega round for coding accelerator Andela, but 2018 was the year it finally surrendered top spot.

Bademosi's home market has long been touted as a tech titan in the making, with its educated, tech-savvy population, huge addressable market and a myriad of problems to be solved -- and therefore, opportunities. However, until 2018, investors still preferred the safer bet of backing South African startups.

No longer. Nigeria is now indisputably king when it comes to tech funding, and was home to 28% of Africa's funded startups last year. These 58 companies raised $95 million between them, almost 30% of the continent’s total. South Africa was a distant second, with 40 startups raising a combined $60 million.

For Nigeria, this represents a significant year-on-year boost: In 2017, just 30 Nigerian companies raised $63.3 million between them, $40 million of which was accounted for by Andela. The number of Nigerian startups securing investment increased by more than 90% in 2018, and total funding jumped 50%. Thirteen of those startups bagged US$1 million or more, up from just six in 2017. Nigeria has arrived, in funding terms at least.

Fintech firms first
Nigeria's place at the top of the pile was driven by investments in fintech companies. The year saw major rounds for the likes of Mines, which has developed a credit platform, and payments startups Paga and Paystack, but these were just three of the 22 Nigerian fintech companies to secure investment last year. Indeed, these fintech firms secured more than $60 million between them, making up two-thirds of the country's overall total.

The size of the market, and the services that innovative tech startups are managing to provide to people within it, are key here.

"In recent years, the Nigerian fintech space has introduced a number of innovative solutions that have drawn a lot of attention to it. Cowrywise and Piggybank have made digital savings mainstream. Aella Credit, Branch, Paylater and RenMoney are providing lending facilities to people who historically couldn't get an institutional loan," said Shola Akinlade, CEO of Paystack, which raised $8 million. (See How Fintech is Driving an African Startup Funding Frenzy.)

Bademosi agrees, and has put his money where his mouth is, with Microtraction backing a host of early-stage Nigerian fintechs in 2018. "It's a combination of markets and the amount of developer talent," he said.

The dominance of fintech was not just confined to Nigeria. The sector had a record year funding-wise, with 58 companies raising a combined $132.8 million, an increase of 130.1% on 2017.

Adia Sowho is Nigeria managing director for Mines, which raised a US$13 million round last year, one of the largest in the fintech space across Africa. She said its clear whu investors are backing fintechs. "Africa presents a massive opportunity for certain financial services given its population and infrastructure gaps. There is plenty of opportunity for fintech solutions to meet consumers' needs," she said.

Funding is also crucial for fintech businesses, so the spike in investments is welcome. "Fintech [firms] are filling infrastructure gaps -- infrastructure companies have a different, often higher, funding profile," she said.

The numbers may be impressive, but there is still more to come from the space.

"The fintech story as an enabler of sustainable returns is still new. It hasn't been proven out, yet coupled with the fact that frontier and emerging markets carry a higher risk profile, these factors make fundraising a much longer conversation that in other markets. Over time, this will reduce," said Sowho.

— Tom Jackson, co-founder of Disrupt Africa, special to Connecting Africa

Innovation hub

Story

Ilara Health aims to improve quality of care in Kenya

Kenyan healthtech startup Ilara Health aspires to improve the quality of care in the country's clinics by providing equipment financing and digitizing facilities with its software.

Story

Orange opens digital center in Guinea-Bissau

Pan-African operator Orange has opened an Orange Digital Center (ODC) in Guinea-Bissau.

More Innovation hub

Latest video

More videos

Partner perspectives

All Partner Perspectives

Sponsored video

More videos

Follow us on X

Industry announcements

More Industry announcements

Upcoming events

Cyber Revolution Summit
August 9, 2024
Gaborone, Botswana
Africa Tech Festival 2024
November 12-14, 2024
Cape Town, South Africa
More Upcoming events

Africa Tech Perspectives

Story

Uber's Marjorie Saint-Lot on inclusion and sustainability in Africa

Uber's Country Manager for Ghana and Cote d'Ivoire, Marjorie Saint-Lot, shares how the ride-hailing company is approaching public-private partnerships, environmentally friendly initiatives and gender inclusion in Africa.

Story

The 100 most influential African leaders in 2023

A new report from Africa Tech Festival and Connecting Africa puts a spotlight on the top 100 African leaders in the telecoms and technology sector in 2023.

Story

Deep dive into East Africa's tech startup ecosystem

New survey reveals a lack of access to investors, reliance on international VCs and global recession trends as the biggest barriers for East African tech startups to access funds.

More Africa Tech perspectives

Guest Perspectives

Story

Leadership Lessons: The importance of mentorship for career growth

By Nollie Maoto

Nollie Maoto, First Rand Group's compliance chief data and analytics officer and Africa Tech Festival Leadership Council member, reflects on the importance of mentorship for career growth for African women in data analytics.

Story

Omdia View: May 2024

By Omdia Analysts

May 2024's telecoms highlights in the Middle East and Africa included African 5G subscriptions surpassing 5 million, growth from SpaceX's satellite Internet service Starlink, and a major fiber partnership in the Middle East and North Africa.

More Guest Perspectives

Like us on Facebook

Newsletter Sign Up


Sign Up
Tag id test-002