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Nigeria overtakes SA in tech start-up race

Nigeria overtakes SA in tech start-up race

Investment into African tech start-ups hit the highest levels since records began in 2017, with 159 start-ups raising in excess of US$195 million, according to Disrupt Africa Tech Startups Funding Report 2017.

The research reveals that the total funding of African tech ventures grew by 51% as compared to 2016, while the number of funded start-ups also increased by 8.9%.

It also found that while South Africa, Nigeria and Kenya remained the top three investment destinations for the third year running, for the first time the amount of funding secured by Nigerian start-ups overtook South Africa in 2017 - although significantly more South African ventures raised.

Gabriella Mulligan, co-founder of Disrupt Africa, says a key takeaway from the research is the extent to which both the number of start-ups raising funding and the overall amount of investment raised has grown considerably.

"There has also been the highest number of multi-million dollar rounds on record. It shows there can be no question about whether or not the African 'tech revolution' is really happening or not - there's concrete evidence of it. There's no doubt that more quality ventures are being built, and investors are willing to back them - more than ever before," says Mulligan.

"Other interesting points - while typically in past years almost all the funding has gone to start-ups in the top three countries (South Africa, Nigeria, Kenya), the proportion of funding going to these countries is rapidly declining ... this means more and more money is going to alternative markets around Africa - showing that investors are no longer confined to these traditional hubs, but are looking continent-wide for talent and business opportunities. The pan-African ecosystem is really coming into its own," she adds.

Mulligan says Nigeria's story is interesting. "While 2017 marks the first year it overtook South Africa in terms of the total amount of funding raised (big news!), this doesn't tell the full story - as more the 60% of Nigeria's total funding went to one venture (Andela). If you take Andela out of the mix, Nigeria performed worse than South Africa, and even worse than Kenya. So it's mixed messages about Nigeria really."

According to Disrupt Africa there are signs of increasing investor interest across less developed markets also, with the total percentage of funding received by these top three ecosystems declining to 74.7% from 81.7% in 2015. Ghana, Egypt and Uganda are unequivocally emerging as hotspots.

"Fintech proved by far the most attractive sector for investors, with 45 fintech start-ups raising almost one-third of the total funding going to African tech ventures in 2017. Interest in e-commerce rebounded - spiking 350 percent on the previous year to see start-ups raise over US$16.7 million. Meanwhile agri-tech raced to the front of the stage, with funding of the sector growing 203 percent on 2016," the company states.

Looking ahead, Disrupt Africa expects the general upswing to continue with additional money and funding. The company predicts that South Africa will regain the top spot, while Kenya will continue to perform strongly and Ghana will begin to leave its mark.

"That being said, access to enough funding for start-ups outside the top three markets is still a challenge. As is support for start-ups not based in major hub cities. We still have a relative lack of success stories being shared - we need more positive stories emerging. The ventures raising big tickets have a duty to do well and further cement confidence in our ecosystem. Investors have proven fickle in past years - there was a substantial drop-off in investment in 2016 as compared to the previous year. Hopefully this won't repeat itself again," Mulligan adds

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