With Cape Town now being recognised as the tech capital of Africa, topping international rankings for foreign direct investment, 2021 is shaping up to be another impressive year for African Venture Capital (VC). Although Africa is some-what behind the curve in curbing the Corona virus, and with social unrest and economic challenges clearly prevalent, several African cities are emerging as leading startup and tech investment hubs.
Startups in Nigeria, Kenya, Egypt and South Africa raised a total of US$625 million last year. Of those, Kenyan startups raised US$191 million, the most of any other African country, according to Disrupt Africa’s African Tech Startup Funding Report for 2020. With much of the year still to come, and varying reports materialising, this number for 2021 may have already surpassed the USD$1 billion mark, thus illustrating the continued momentum across a myriad of startup geographies each with the potential to become its own powerhouse.
Within the HAVAÍC portfolio alone, we have closed, or are in the final stages of closing, significant capital rounds for our portfolio companies, totalling close to USD$100 million.
The World Bank predicts that two thirds of the world’s GDP growth will occur in cities over the next fifty years. Africa’s rapid urbanisation is a welcome development aligned to this trend, as cities foster greater economic potential, business collaboration, and technological innovation needed to leapfrog traditional infrastructure. This coupled with a young tech savvy population and high mobile penetration rates, is creating thriving African tech ecosystems.
HAVAÍC sees Southern Africa, dominated by South Africa; Anglophone West Africa, led by Nigeria; Francophone West Africa, dominated by Cote d'Ivore and Senegal; East Africa led by Kenya; and North Africa dominated by Egypt, as key African geographies following the rapid urbanisation and innovation trends, and ones to pay close attention to. Each are quite different, with some of them tackling more regional challenges and others offering globally scalable solutions.
A diversity of businesses are emerging in critical sectors such as e-health, fintech, security and education, as African startup investment continues its upward trajectory, having increased year-on-year for the past five years. West African hubs like Lagos have benefitted hugely from locals being skilled abroad and returning home where a young, bourgeoning middle class are open to new fintech propositions as we have seen from the likes of Flutterwave. Meantime in Nairobi, an influx of foreign direct investment and financing from national development finance institutions, coupled with international skills transfers, have contributed to creating a flourishing startup environment.
Cairo’s access to favourable funding and product distribution from the Middle East is unique on the continent. Egypt’s large local customer base and proximity to major international hubs in the UAE, Qatar, Oman and Saudi Arabia make it a strong B2B (business to business) and B2B2C (business to business to consumer) regional player. Of course, South Africa’s strong blue chip corporate base and financial and digital infrastructure and skills have resulted in the country’s startups being able to enter developed markets with their seamless tech competing toe-to-toe in international markets.
In both English and French speaking West Africa, there are significant B2B2C opportunities, thanks in part to the development and growth of cities like Dakar, Abidjan and Lagos. Ultimately, massive improvements in technology enabling infrastructure, maturing financial markets and broader access to higher education are laying the foundation for Africa’s tech hubs and signal an exciting future for the continent’s startups who prove time and again they can compete with the best in Silicon Valley, London and Singapore.
HAVAÍC’s own investment thesis is centred around investing in local African tech businesses that have the ability to scale and service both regional and global markets. With investments in technology company’s headquartered in South African, Kenya and Nigeria, servicing close to 2 million customers in over 180 countries across the globe, it is our ability to invest locally, strategically nurture, and help internationalise our portfolio that sets us apart.
With tech hubs emerging as powerhouses in the startup space across the continent, foreign investments into the African VC sector at an all-time high, and a rapidly growing trend of African businesses successfully scaling locally and abroad, more than ever before, investing and supporting local, growing innovation with the potential for global elevation, is a smart investment decision at the heart of Africa’s future.