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Africa's tech start-ups attract US$2bn investment

By , ITWeb
Africa , 29 Jan 2020

Africa's tech start-ups attract US$2bn investment

In 2019, 243 African tech start-ups raised a total of US$2.02-billion in equity through 250 rounds, representing a 74% growth year-on-year.

This is according to Partech Africa, which today published its annual report on venture capital (VC) funding for African start-ups.

The report shows 2019 was another year of breaking records and achieving new milestones for the dynamic and fast-growing tech investment ecosystem in Africa.

The report, which is the fourth the team has produced, is based on the same methodology as the previous years – it covers equity deals in the tech and digital spaces, as well as funding rounds higher than US$200 000. It covers both disclosed and undisclosed deals.

The Partech Africa report tracked 250 rounds raised by 234 start-ups compared to 164 rounds by 146 start-ups the year before, representing 52% growth year-on-year in deal count.

"We noticed a massive densification of early stage rounds with 206 transactions (57% year-on-year) in seed and series A investments, which confirms investors' confidence in taking early bets in Africa," says Cyril Collon, general partner at Partech.

"Africa's tech ecosystem has moved into the mainstream, transforming economies considerably, and while there are certain ups and downs to be expected in the future, this new reality is also redefining the scope of private equity on the continent, with venture capital on the way to becoming the number one asset class in Africa."

The report says 70 investors made two or more transactions in 2019, compared with 20 investors in 2017.

It adds the top five most active investors have each done about seven deals.

It states Nigeria attracted a record high of US$747-million in tech VC investment (37% of all funding), but only takes fourth place, behind Egypt, in deal count.

Meanwhile, Egypt broke into the top three both in terms of deal count (147% year-on-year) and deal volume (215% year-on-year).

Partech notes the regional landscape has now been redrawn, with 85% of the total funding ($1.7 billion) going to the top four countries – Nigeria, Kenya, Egypt and SA.

According to the report, South Africa has slowed down compared to Kenya and Nigeria in terms of total funding, with $205 million (18% year-on-year) but remains the undisputed number one in deal count with 66 deals (78% year-on-year) thanks to its maturing early stage ecosystem growing faster (28% of all seed and series A transactions).

In SA, 11 start-ups raised 11 rounds equal to or higher than US$5-million.

It points out there were 18 countries with at least one equity tech deal above $200 000 in 2019, compared to 19 countries in 2018.

With total funding of $294 million (53%) raised over 47 deals (24% year-on-year), the rest of the continent (excluding the top four countries) is absorbing 15% of total investment across the continent.

Regarding French-speaking Africa, Senegal confirms again its position as the leading hub, with $16 million raised in six deals, the firm says.

Driven by fintech, financial inclusion remains the main investment sector on the continent, attracting 54.5% of the total funding, it says.

However, the online and mobile consumer services sector has witnessed a steep increase to 29.3% of total funding (versus 19.6% in 2018) while B2B and tech adoption represents only 16.1% of total deals (versus 30.4% in 2018).

"Fintech is clearly exploding on the continent, with more and more digital players enabling start-ups to serve the segment," says Tidjane Deme, general partner at Partech.

"This is one of the reasons that VC investors now have a much larger pool to play with than the traditional private equity investors did before. We're seeing the latter come in into smaller tickets and into the tech space, trying to find interesting opportunities."

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