Is African tech the next big thing?

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At a glance...

African tech companies had an exponential growth in share prices as venture capital grew to over $4 billion in 2021.

In retrospect, African tech firms attracted global players in 2019 that led to significant growth in venture capital. Reports indicate that $2 billion was pumped into African tech startups in 2019.

The visits by Jack Ma and Jack Dorsey, the first IPO by the e-commerce giant Jumia and a couple of $100 million rounds breathed positive energy to the African tech industry.

Notwithstanding, by February 2020, the coronavirus was quick to lower hopes for tech investments from local and international investors.

It wasn’t a bad year per se as African startups got a whopping $1.5 billion in funding and witnessed some great exits such as Stripe-Paystack and WordRemit-Sendwave.

At the beginning of 2021, bullishness among African investors had returned – after all, companies were back in business and the pandemic pushed people to develop new routines in online shopping, online delivery, telecommuting, and education. Therefore, venture capital was expected to exceptionally go up and Africa would not be an exception.

AfricArena predicted that investments in tech startups will be between $2.25 billion and $2.8 billion. Stephen Deng of DFS Lab, a company that funds e-commerce startups, also predicted that tech startups will grow to $3 billion by 2021.

In 2021, investments in African tech companies grew exponentially as they raised over $4 billion.

With five unicorns produced in 2021 and an increased number of companies headed by women, these are some of the big areas of growth in African tech. This article highlights key events in African tech.

Big funding and unicorns

A unicorn refers to a privately owned company that has a valuation of at least $1 billion. Achieving a unicorn status is one of the greatest achievements for any startup.

In the African tech industry, Jumia was the first unicorn after reaching a valuation of $1 billion in 2016 followed by the fintech company Interswitch in 2019. Jumia relinquished its unicorn status and became a billion-dollar publicly-traded company after registering its initial IPO on the NYSE in 2019.

Jumia’s case is similar to Fawry, the Egyptian fintech company that went public on the Egyptian stock market in 2019. A notable difference though – Fawry was never a unicorn because it reached a billion-dollar valuation one year after the IPO.

Interswitch remained Africa’s only unicorn until five tech firms joined the club in 2021. Out of the five, four companies are fintechs: Flutterwave, OPay, Wave, and Chipper Cash. The fifth firm is Andela, the tech talent marketplace.

Flutterwave became a unicorn in March at $1 billion, OPay in August at $2 Billion, Wave and Andela in September at $1.7 billion and $1.5 billion respectively. Chipper Cash’s valuation reached $2 billion in November.

Many factors are pivotal for the increase in the number of unicorns. One of the factors is experienced founders – these unicorns were founded by individuals with a wide experience in technology. Also, a large market base especially in the Big Four (Kenya, Egypt, South Africa, and Nigeria) encouraged exponential growth. High demand in digital payment methods provides a perfect environment for the growth of fintechs.

International Investors

Although international investors have funded African startups before, they went overboard in 2021 with their investment spree on African tech startups.

For example, Target Global, Berlin-based venture capital, and Tiger Global, a hedge fund firm, funded startups at early stages and growth stages. Target Global funded Series A rounds for Kuda and Mono, and pre-seed phases for Kippa and Edukoya. Meanwhile Tiger Global Union54’s seed round, Series A round for Mono, and later rounds for FairMoney and Flutterwave.

Also, Sequoia Heritage, wealth management funded Telda’s pre-seed, Series A for Wave, and Sequoia Capital China funded OPay’s Series C.

Furthermore, African tech startups attracted funding from Dragoneer, FTX, Fidelity, SVB Capital, and Sam Altman. I can’t forget to mention routine financiers like Tencent, who invested in various rounds of ULesson, Ozow, and Tymebank, and Softbank who led Andela and OPay’s key rounds through Vision Fund 2.

$100M+ rounds

African tech startups had more $100 rounds than ever before. In 2019, there were only three $100+ rounds with OPay raising $120 million in Series B round and $100 million and $200 million for Andela and Interswitch respectively. Surprisingly, there was no 9-figure round in 2020.

This didn’t last long as Africa had a record of 5 unicorns and eleven 9-figure rounds from 10 startups.

For unicorns, Flutterwave raised $170 million in Series C, OPay got $400 million in Series C, both Wave and Andela got $200 million and Chipper Cash had two rounds worth $100 million and $150 million.

Let’s look at other startups. Tymebank had a $100 million Series C round, Jumo and MT-Halan had $120 million deals while TradeDepot and MFS Africa got $110 million and $100 million respectively.

More female-led startups

Not just in Africa but internationally, female-led startups face a huge funding challenge. Funke Opeke, the CEO of Main One is one of the leading startup founders who raised more than 1 million dollars for her firm.

Take a look at how female-led firms struggle to get funding as compared to their male counterparts. Data from Briter Bridges indicate that only 3% of venture capital raised between 2013 and May 2021 went to female-led startups.

An increase in the number of female-led startups that received at least 1 million dollars in 2021 is good news. Such startups include Shuttlers, Bankly, Lami, Okra, Klasha, Akiba Digital, Ejara, Kwara, Edukoya, Reelfruit, and Jetstream.

The Big Four - Kenya, Nigeria, Egypt, and South Africa

These four economies present a good environment for venture capital investors. Lagos, Nigeria has the largest number of unicorns earning it the status of Africa’s unicorn capital. Egypt walked into the Big Four in 2017 after attracting a considerable number of venture capital investors. In 2021, Egypt overtook Kenya to become the third most attractive destination for investors.

The future is bright for Africa’s tech industry. Increased internet connectivity in several African countries is a good sign for tech investors and founders. Expect to see more unicorns and even IPOs in 2022. 

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