Mega investors brought mega rounds to Africa
I 2021 tech-companies in Africa saw a new regime of “mega-round” startup-funding. 11 companies raised each at least 100 million dollars, in total 1,7 billion dollars.
Summary:
- International investors came last year to Africa with mega-deals
- However, Africa is a kindergarten compared to other regions, but going from two to eleven mega-deals in two years suggests a rising wave in Africa
- In total startups raised over 4 billion dollars
Those companies, like Flutterwave and Chipper put an overlooked subregion on the financial map.
The 11 deals worth over $1.7 billion accounted for more than 40% of the 4.2 billion dollars African startups raised in 2021, according to The Big Deal, a startup funding database.
No African startup raised $100 million in 2020. Indeed, except the buzzy acquisitions of Paystack and Sendwave, last year was marked by fears of investor apathy towards Africa. As the pandemic ravaged economies, there was some anxiety that western investors would retreat, focusing rainy day funds on less risky, developed markets.
But this year’s rush of African mega rounds (as $100 million raises are sometimes called in Silicon Valley) suggests those fears did not materialize. Instead, old and new investors raised the stakes with their biggest bets yet.
Before this year, only two African startups had raised $100 million in single rounds: Andela, and OPay in 2019.
Such large raises have been understandably rare in Africa. The continent’s startup scene is barely a decade old, and is burdened by low levels of technology infrastructure, tight consumer spending, and the uncertainty that disturbances like conflicts and political turmoil generate. African startups have had to patiently navigate these weaknesses, requiring some humility in how much they command.
Record-breaking for tech startups – 2 billion dollars
The year 2021 was a record-breaking one for African tech startups, with 564 companies securing over US$2 billion worth of investment.
For the seventh consecutive year, Disrupt Africa is releasing data on the tech investment ecosystem across Africa, contained in the African Tech Startups Funding Report 2021.
The report details how Nigeria, Egypt, South Africa and Kenya are the premier investment destinations on the continent, though funding is also on the rise elsewhere. Fintech remains the dominant sector, and the number of investors grew substantially.
Record for total startups – over 4 billion dollars
Data from various sources show that startups on the continent received over $4 billion from investors in 2021. That represents more than double the investments gotten in 2020.
Numbers, they say, don’t lie, and with help from Briter Bridges’ Africa Investment Report 2021 and data from Africa: The Big Deal, we’ll be extracting some insights. Just like fintech and men dominate funding received, the Big Four – Nigeria, Egypt, South Africa, and Kenya – still dominate Africa’s funding scene. For example, Nigeria alone accounts for a whopping $1.5 billion of the total funding.
While the total amount raised by women is increasing, the percentage of funding going to startups founded or led by women is on the decline from 4% in 2019 to 0.95% in 2021.
The appeal of over one billion people
At the same time, Africa’s appeal as a market of over 1 billion people and the last frontier for tech-driven services like electronic payments, credit, ecommerce, and software engineering talent is growing on investors regardless of present challenges. It is attracting the biggest names in the world, specifically the ones that helped normalize $100 million rounds in Silicon Valley.
Perhaps the most notable is SoftBank, the Japanese firm whose portfolio of exits includes Alibaba, Uber, Nvidia, and Flipkart. It led two rounds in Africa this year: OPay’s $400 million, and Andela’s $200 million.
But there was some dynamism to the investors that fueled the mega round rush. Aggressive American hedge fund Tiger Global co-led Flutterwave’s $170 million raise. Stripe helped make Wave, a mobile money startup, the first unicorn from Francophone Africa. TradeDepot’s $110 million round was led by the World Bank’s International Finance Corporation, arguably the continent’s most influential investor in non-fintech startups. Only MFS Africa’s round was led by an investment fund based in Africa – AfricInvest’s Financial Inclusion Vehicle.
Will $100 million be a new benchmark?
None of these startups raised $100 million as seed funding. Andela’s was its 10th round since 2014. Chipper has raised two rounds every year since 2019. MFS Africa had been on an acquisition spree before joining the mega round party.
This gives an idea of the kind of startups that could be expected to continue the trend in the coming year. Sendy, a Kenyan logistics startup that has raised $20 million to date, is seeking a mega raise for its expansion.
Will SoftBank and other investors evoke more $100 million rounds for non-fintech African startups? That is one among many things to watch, including how many such rounds go to female-founded or led companies. Female-only founding teams have raised only 1% of this year’s $4.2 billion largesse, per The Big Deal.
Africa is in mega round kindergarten compared to other regions. North America, Asia (China), and Europe had 293, 158, and 66 such rounds last year alone. But going from two to eleven in two years with a pandemic in between suggests a rising wave in Africa, one that could evolve unexpectedly in the coming years all things being equal.
(Sources: The Quartz Africa Weekly, African Tech Startups Funding Report 2021, The Big Deal).