Emerging Markets VC & Startups: Africa’s Internet Economy is Positioned for Growth

Last month, Google and the International Finance Corporation (IFC) released a joint report titled e-Conomy Africa 2020 focused on Africa’s booming internet economy and some of the emerging trends driving it. The full report is 80-pages long, but the content has significant insights into the future of technology, startups, and venture capital for the continent.

By the end of this year, projections show Africa’s internet economy is to reach $115B. The analysis concludes that this figure can amount to $180B by 2025, measuring 5.2% of the continent’s GDP.

Several vital drivers are fueling this growth. African citizens have increased access to faster and better internet connectivity, with 40% of the population now online through increased access to mobile devices and fiberoptic subsea cable currently being laid around the continent. Africa’s population is expanding in urban areas, with an estimated 45% expected to live in cities by 2025. These cities are becoming hubs for innovation, education, and commerce. Also, access to connectivity, education, and finance in these cities has led to a growing tech talent pool and a vibrant startup ecosystem. Currently, 700K developers are in Africa, mostly concentrated in startup hubs within South Africa, Egypt, Morocco, Nigeria, and Kenya. Lastly, Africa has committed to creating the world’s largest single market under the African Continental Free Trade Area, increasing commerce opportunities throughout the continent.

2019 saw record venture capital investments into Africa, reaching $2.2B in equity investments. This year’s figures will likely be much lower due to the impact of Covid-19, with 1H 2020 closing $494M of capital. We have seen investment pick up in the second half of the year in other regions, so we will need to keep an eye out for Africa’s year-end numbers. Regardless, we know 2020 is an asterisk for everyone.

FinTech continues to lead the continent’s innovation and funding, receiving 54% of investment in 2019. This trend was prevalent this year when Stripe announced its acquisition of Nigerian FinTech PayStack for $200M, the largest startup acquisition to date from the country. eCommerce is the second-largest funding target, receiving $134M in the same year. Other top trending technologies are HealthTech, Media, Mobility, and Logistics.

These trends and numbers are pretty staggering. The amount of growth in the last decade alone (+4% GDP, twice that of the EU and LATAM) has led to increased interest in investing in Africa, but the very early Seed and Pre-Seed financings are still nascent. One of the most considerable barriers to this is complex and inconsistent regulations around entrepreneurship and funding across the continent. Still, there is some movement with examples like the Tunisian Startup Act.

The report highlights other areas for future success, such as investments in infrastructure, digital goods consumption, public and private assets, and digital skills. That last point is crucial. Last year, Sacha Poignonnec, the CEO of Africa’s largest e-commerce company, Jumia, turned heads by suggesting that there aren’t enough developers based in Africa to service its hiring demand. Currently, developers are mostly trained in universities or self-taught, creating more opportunities for training programs to emerge.

Assuming these trends will continue, and adequate regulation helps support them, technology, venture capital, and entrepreneurship have a bright future on the continent. Better get in now to reap the rewards.

If you’re interested in reading the full report, you can find it here.

Regional News

Africa

• Kenyan company SunCulture, a provider of solar power systems, water pumps, and irrigation systems for smallholder farmers, has closed a Series A investment round of US$14M led by Energy Access Ventures (EAV).
  Link
• A new program launches to accelerate impact-driven tech companies in Africa. Link
• Kenyan HealthTech startup secures $3.75-million. Link
• Ivory Coast-based StarNews Mobile raises $1.8m pre-Series A funding. Link
• Oolu, a Senegalese-based solar energy startup, has raised $8.5 million in Series B equity investment. The round was led by an independent renewable energy developer, RP Global. Link

Asia-Pacific

• China’s ZWC Partners completes the first close of a new fund at $400M. Link
• Access Ventures secures US$30M for Fund II, aims to hit its final close by Q3 2021. Link
• UOB’s second Asia impact fund hits its first close at US$60M. Link
• Filipino fintech firm SquidPay banks $2M in Series A funding. Link
• Cove raises US$4.6M led by Keppel Land to scale its co-living biz in Vietnam, Philippines. Link

Latin America

• Mozper Banks $3.55M To Develop Debit Card, App For LatAm Children. Link
• Chilean startup Justo raises $2.3M for Latam expansion. Link
• TerraMagna raises a $2M Seed round led by ONEVC. Link
• Mexican crypto exchange Bitso closes $62M Series B. Link
• Valiu raises a $5.25M seed round. Link

Middle East

• Startup Istanbul launches a USD 10M fund to invest in Pre-Seed startups. Link
• GELLIFY to launch €20 million MENA fund. Link
• eMushrif raises $2.3 million in Series A. Link
• Tabby raises $23M Series A to grow its platform in UAE and Saudi Arabia. Link
• Progressive Generation raises pre-Series A investment for its kids-safe streaming platform. Link

Originally published at https://vagabondvc.substack.com.