Venture Capital In Africa Is Growing Year-On-Year But There’s A Twist

The year 2019 marked the first time venture capital in African tech hit the USD 1 Bn mark, fuelling higher and higher expectations.

2020 seemed a great year too, starting from January when the African ecosystem scored a few high ticket-size funding. The deals that set the tone in the first quarter of the year were: USD 55 Mn by Jumo, USD 40 Mn by Egypt-based Vezeeta, and USD 20 Mn by Kenyan startup, Sendy.

Starting March, investor (and not just them) sentiments were dampened by the unexpected COVID wave, when most of the ongoing conversations for investments were put on hold.

Q1’20 investment figures of over USD 300 Mn beat Q1’19 numbers by almost USD 100 Mn. The Q1’19 beefed up value was due to one investment of USD 100 Mn raised by Andela. The pandemic somehow put a brake on the speed of investments on the continent. It seemed that the venture landscape spiralled down, and it did. The Q2’20 painted a bleak picture for the ecosystem with 57 percent lower investment value than Q2’19 figures.

But this lacklustre period did not hold on for too long. And possibly, this period alone was the time that pulled down the yearly fundraise number of 2020.

Moving on to Q3’20, the investment amount became comparable to 2019 figures. Surprisingly, Q4 of both years (2019 and 2020) had a big investment amount of USD 200 Mn, but one was in the form of investment (’19) and the other as exit value (’20).

Seed rounds took the bullet this year

Many uncertainties in the investor playfield reflected on the venture capital amount placed in the seed rounds. It can be assumed that investors played it safe in 2020. Although the number of seed round deals did not plunge that steeply, the amount was sliced to half.

Interestingly, out of all the seed deals this year, the most active VC, Kepple Africa Ventures made ~33 percent of the investments, in terms of the number of deals.

Debt deals slowed down too

Unlike the previous year, 2020 also faced lower numbers of debt deals. In 2019, north of USD 150 Mn was invested in debt deals; in 2020 the figures did not reach $100 Mn. Startups in the renewable energy sector mostly raised debt funding.

Another category of investments that faced challenges in 2020 was Prize & Grant money with almost half the amount raised than the previous year.

Note: In our following articles, we would be covering the country and industry-wise information on the venture deals & investments.