Capital Investment In African Start-Ups Has More Than Doubled – VC4Africa
Seed-stage investing is on the rise globally, accounting for 67% of all venture capital (VC) funds in North America and increasing 19-fold in Europe. According to PwC and the National Venture Capital Association, venture capitalists invested $48.3bn in US startups last year, the biggest level of investment since the dotcom bubble burst in 2001.
But it is not just in the West that these trends can be seen.
For instance, the online funding platform VC4Africa found that the total capital investment in African startups made through the organisation in 2014 was more than double the previous year’s figures.
The overall numbers for invested capital in Africa last year are probably close to $500m when huge funding rounds for e-commerce companies like Takealot, Jumia and Konga are taken into account. And the first half of 2015 offers no evidence that this growth in available funding is going to slow down.
African startups have already seen a spate of funding rounds and, most tellingly, acquisitions. East African solar startup M-KOPA raised $12.45m, e-logistics company Parcelninja $1.7m, and Nigerian hotel booking platform Hotels.ng $1.2m. There have also been impressive exits for Kenya’s Weza Tele and South Africa’s WooThemes.
For VC4Africa founder Ben White, this growing willingness to invest in smaller African businesses is linked to both the quantity and quality of the continent’s entrepreneurs.
“The number of venture applications on VC4Africa has grown 640% in the last three years,” he says. “More important than the increasing number of ventures coming up is to recognise that their level of seriousness and overall quality continues to improve. The increasing scope of investable opportunities has resulted in an increase in investments.”
These investments are coming from a variety of sources. Mobile operators are playing a part, with the likes of Millicom, Safaricom, Airtel and Orange all launching investment funds of sorts. Private equity firms in the US and Europe – such as Helios Investment Partners – are beginning to see Africa as a priority too.
Meanwhile, individual ‘angel’ investors who invest smaller sums, but earlier in the process, are active especially in South Africa, while investment networks are also more common. The African Business Angels Network (ABAN), for example, is made up of the likes of the Lagos Angels Network (LAN), Cameroon Angel Network (CAN), Cairo Angels and the Ghana Angel Network (GAIN).
White says this plethora of investments is increasingly attracted to the high potential, high growth opportunities Africa has to offer, particularly with startups in the fields of e-commerce, clean technology, e-health and financial services. Kenya, South Africa, Uganda and Nigeria are the key investment destinations currently, according to VC4Africa’s research.