Africa, one of the fastest growing venture capital markets in the world –

Venture capital deals poured more money into Africa in 2021 than the previous seven years combined, breaking all sorts of records.

650 venture capital (VC) deals raising $5.2 billion in total recorded in 2021, a 104% increase from 319 reported in 2020. This reflects a welcome maturation in the African entrepreneurial space. The number of venture capital deals recorded last year corresponds to 70% of the total venture capital deals recorded on the continent between 2014 and 2020, and 41% for the period 2014 to 2021.

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261 Unique businesses were backed by at least one impact investor, 75% of investors active in Africa in 2021 were international and 25% were based in Africa. Africa is one of the fastest growing venture capital markets in the world and according to the African Private Venture Capital Association (APVCA), this trend shows no signs of slowing down any time soon.

In their last Venture capital in Africa report, APVCA says that while each investment stage has seen year-over-year growth, late-stage deals have seen triple-digit acceleration. West Africa was the regional winner, driven in large part by significant trade activity in Nigeria.

Politics, technology and venture capital

Governments across Africa have really stepped up their political legislative game around entrepreneurship in 2021 with a wave of FinTech-related regulations. Egypt has introduced legislation allowing its Central Bank to issue banking licenses to Fintech and digital commerce companies, a first for them.

The Capital Markets Authority of Kenya has instituted a Regulatory Sandbox platform to which it has admitted nine FinTech startups to live test their products and services in a controlled environment, free from the constraints of existing regulations.

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The Uganda Capital Markets Authority has partnered with the European Union and FSD Uganda to establish the Deal Flow Facility. This technical assistance/matchmaking initiative aims to bridge the gap that emerging businesses in Uganda face when trying to access growth capital.

The South African government has introduced a start-up visa program to stimulate private sector growth. The proposed initiative would allow entrepreneurs to live and start a business in the country, potentially attracting investors and high-impact entrepreneurs to its shores.

The Nigeria Startup Bill has been endorsed by the country’s executive and is now awaiting parliamentary approval. Co-created as a joint initiative between the Nigerian tech ecosystem and the presidency, this law shows a way to create a bottom-up enabling regulatory environment. “Nigeria’s example paves the way for other regulators across the continent to strive to keep up with the momentum of ecosystem expansion, to ensure legislation is enabling, adaptive and inclusive,” reads -on in the report.

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Fintech dominates but mobility is growing

Finance was the most active sector by volume (32%) and captured the largest share of deal value at 60%. African tech really pulled out all the stops in 2021. 81% of venture capital deals closed in 2021 in Africa were either for tech companies or tech companies operating in various sectors.

“Africa’s tech ecosystem continues to thrive, with a growing number of African entrepreneurs pioneering and adapting tech solutions to the continent’s most pressing challenges.

“Harnessing disruptive technologies has become common practice in Africa’s nascent ecosystem. Digital tools are increasingly integrated into the formulation of business models, bringing much-needed products and services to largely underserved markets,” reads the report.

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APVCA sees the FinTech sector dominating the share of long-term venture capital deals, but stresses that technological innovation is not limited to this sector alone. E-commerce and HealthTech also saw significant growth, as did Mobility Tech.

“2021 has seen a proliferation of startups offering practical yet innovative solutions to address urban mobility challenges in African cities. Startups such as Kenyan electric vehicle transport company NopeaRide. Togo’s transport technology platform Gozem and Nigeria’s moto-taxi app Max.neg are all leveraging technology to improve accessibility and affordability of mobility services, and each has raised funds in 2021,” the report said.

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15 companies closed deals worth more than $100 million in 2021 – 13 in financials, 2 in industrials and one in consumer discretionary. Five of the large transactions involved companies headquartered in the United States (Chipper Cash, Tala, Andela, Zipline International); three in Nigeria (Palmpay, TradeDepot and OPay); two in South Africa (MFS Africa and Tyme Bank); one in Senegal (Wave Mobile Money); one in Egypt (MNT-Halan) and one in Great Britain (Zepz).

The first nine months of 2021 have seen a record number of African startups reach a valuation of over $1 billion. Five high-profile deals in 2021 have seen the companies achieve unicorn status. With the exception of Andela, they were all in the fintech sector. Egyptian startup Swvl and Nigerian digital banking startup Kuda could reach unicorn status by 2023.

With the exception of MFS Africa whose $100m Series C investment was led by AfricInvest and MNT-Halan whose $120m fundraising was led by the Africa Development Partners International, the other large deals that took place in Africa in 2021 were led by international private equity and venture capital fund managers from the United States, Japan, Singapore and the United Kingdom. United. ESI

APVCA Venture capital in Africa report is available online.

Alternative funding mechanisms will be discussed at Enlit Africa

Enlit Africa (the unifying brand for African Utility Week and POWERGEN Africa) invites you to join the conversation from June 7-9, 2022 in Cape Town, South Africa.