As the world is coming out of the shadows of Covid, Investors are pumping money into African startups. Though nearly 80% of all investments go to the Big 4 in the continent – Nigeria, South Africa, Kenya and Egypt – things are changing for the better now with a fair distribution of funds among other countries.
Startups in Africa raised $4 billion last year, three times the funding in 2020 and 2019, when the continent received $1.7 billion and $1.3 billion, respectively. Some 400 startups get funding from venture capitalists and angel investors.
Some top venture capital investors included Future Africa, Launch Africa, Kepple Africa Ventures, LoftyInc Capital, 4DX Ventures, EchoVC, Microtraction and Global Ventures.
The Big 4 indeed got the lion’s share of investments, but money flowed into 18 other countries. Nearly 20% of all startups that raised money were from countries other than the Big4.
Nearly a dozen companies in Morocco, Ghana and Uganda garnered investors’ interest. At least four startups raised funds in Senegal, Rwanda, Tunisia, Cameroon, Ivory Coast, and Ethiopia. Mali and Tobago, too, managed to raise funds for more than two firms.
More Investments Needed
While VC action is on the rise, still the volumes are low for those beyond the Big 4. To address this anomaly and to give an impetus to VCs, which will help startups grow, countries need to extend fiscal and non-fiscal benefits to investors.
There is also a need to improve the legal and institutional framework to give VCs and angel investors confidence. They can use the African Continental Free Trade Area to attract investments and, at the same time, reduce entry barriers for investors.
Though the Big4 have been making news and garnering all the funds, innovation & entrepreneurship can happen anywhere if the proper environment is nurtured.
With a population of 1.21 billion, 70% of whom are below 30 years of age, Africa can develop technological tools that suit local needs and aspirations. As the tech scene matures, there could be advancements that may benefit the entire world in the future.
