African tech startups to receive $2.8 billion VC funding

Despite the pandemic in 2020, Africa’s startup ecosystem still recorded the highest number of deals in that year.

Venture capital funding for African startups will fall between $1.2 billion and $1.8 billion in 2020, according to AfricArena, an African tech ecosystem accelerator. Total investment raised was $1.4 billion and $1.3 billion, respectively, according to reports from Partech and Briter Bridges at the end of the year, confirming AfricArena’s prediction.

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This year, according to a report by AfricArena titled “The state of tech in Africa 2021” is predicting that VC investment in Africa will increase between $2.25 billion and $2.8 billion.

The impact of the COVID-19 pandemic on Africa’s tech innovation and investment landscape has yielded a mixed bag of results. According to estimates in a few reports, the number of deals has increased while the total value of equity deals has decreased. This demonstrates that, despite smaller ticket sizes, Africa’s appetite for technological innovation is still strong.

Regions in Africa that received more VC investment in 2020

In 2020, Nigerian startups received the most investment According to the Partech report with a total value of $307 million in 71 deals and an average deal size of $4.3 million.

This is 59% lower than the $747 million invested in 38 deals at an average of $19.7 million in 2019.

Nigeria, Kenya, Egypt, and South Africa are the top four countries.

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Nigeria does not rank among the top five countries for startups based on their country of incorporation.
According to TechCrunch, it appears that the majority of Nigerian startups that have raised capital are not incorporated in the country. This is most likely due to the country’s difficulty in doing business.

Stripe’s acquisition of Paystack, Visa’s 10% stake in Interswitch, and Flutterwave’s recent “Unicorn” status all demonstrate Africa’s fintech space and ability to innovate on a global scale.

Future projections on funding of African startups in 2021

According to Maxime Bayen, African so far in 2021 startups have raised over $800M as of 30th April 2021.

In a new report that was reported this year, AfricArena is predicting that VC funding in African startups would increase between $2.25 billion and $2.8 billion. If this is achieved, it will surpass 2019 figures.

According to the report, “Going into 2021, the situation remains marked by several inhibiting factors: the great difficulty to travel into and across the continent, the macro-economic uncertainties, as well as a slower commitment of capital from LP to new GP Funds, and the increased difficulty to raise capital in very early stage. On the upside, the “great digitalization” started by the pandemic is creating many opportunities in education, fintech, B2B solutions, and eCommerce, and leapfrogging digital transformation issues across the corporate spectrum.

We foresee that the first two quarters of 2021 will be similar to Q4 2020, with the mix of factors mentioned above. Vaccine campaigns will likely take longer than hoped to have a meaningful impact. However, this rollout – regardless of how long they will actually take – will eliminate the major uncertainty about the end of the pandemic, which is only a question of time.

As a result, we expect an extremely strong acceleration of deals from Seed to Series B as well as major growth deals, together with some IPOs (Nigeria’s Interswitch, for example), that will propel deal activity to never seen before levels of activity.

As of April 2020, our forecast for 2021 was ranging from under $1.6 billion to over $3 billion, with the worst-case scenario based on a prolonged and fragmented impact on the African economies, and the best-case scenario factoring in a full recovery by Q1 2021. Based on the above observations, our views are now that 2021 will range between $2.25 and $2.8 billion.”

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