African tech reboots as investment roars back
According to data collected by Briter Bridges, African startups have raised $940m since January 1st 2021.
Most reports say that Africa is set to raise over $2bn this year, depending on the recovery from Covid-19 which is testing many countries in the form of a third wave. However, Africa has started the year well for tech deals and 2021 is expected to outperform 2020.
Deals to remember from the first half of 2021
Fintech startup Paymob has raised $18.5m in a Series A round, in the largest equity round seen in Egypt yet. The round was led by Dubai-based VC firm Global Ventures with participation from Egyptian investment fund A15 and Dutch development bank FMO. The startup, founded in 2015, helps facilitate online and offline payments between merchants and customers. It claims to process 85% of mobile wallet transactions in Egypt.
Kuda, Nigeria’s first mobile-only bank, has raised $25m in a Series A round led by Valar Ventures, the firm co-founded and backed by PayPal co-founder Peter Thiel, with participation from Target Global. This adds to Kuda’s $10m seed round in November 2020 – the largest seed round in Africa yet. Customers have increased from 300,000 to 650,000 in between funding rounds, with transactions increasing to $2.2bn in February 2020, the Chief Operating Officer said.
Nairobi-founded data analytics company Gro Intelligence raised $85m in a Series B funding round co-led by Intel Capital, Africa Internet Venture and American investment giants Ronald Lauder and Eric Zinterhofer. The startup, which is headquartered in New York, uses over 650 trillion data points to provide insight into the cross-sections between food, climate and agriculture. The data analytics company will use the funds to accelerate the global adoption of its platform and to enhance its machine learning capabilities.
Angola-based crowdfunding platform, Deya, the first of its kind in Lusophone Africa, has raised $50,000 in pre-seed funding to help it scale and begin generating revenue. Launched in 2017, the startup is hoping to bring together fund-raisers and donors on its platform for social impact causes. It has helped to raise more than $22,000 so far.
Africa’s mobile gender gap
According to a report by GSMA, the global industry association of mobile network operators, more than 112m women came online in 2020 from low and middle-income countries. That said, the gap between male and female internet usage remains substantial.
Women are 7% less likely than men to own a mobile phone and 15% less likely to use the internet. In total, there are 234m fewer women than men accessing mobile internet, despite a reduction in the gap that was driven by an improvement in South Asia.
The gap in mobile ownership stands at around 14% in Sub-Saharan Africa and the gap in mobile internet usage is around 37%. These figures remained largely unchanged from 2017 to 2020, the report says.
This is compared to a reduction in South Asia’s gender gap in mobile internet use from 67% to 36% over the same period. Africa and South Asia are the worst-performing areas compared to other low to middle-income regions including Europe & Central Asia, Latin American & Caribbean and East Asia & Pacific where the gender gap in ownership and use hovers at less than 5%.
Help or hindrance? Nigeria’s Twitter ban hits tech sector
Nigeria has surged ahead over the past few years as the African country with the biggest and most well-known startups. Two of Africa’s four unicorns were founded in Nigeria, for example. Speaking to American VCs and funds, they are more likely to have heard of Nigerian fintech than startups from other countries across the continent.
Yet Nigeria’s founders have always had a complicated relationship with national regulators. Mobile money licenses were a long time coming, for instance. And the authorities have a tendency to spook investors. In 2018, the central bank accused teleco giant MTN of illegally sending $8.1bn to its parent company in South Africa, demanding that it repay the funds.
The news that Twitter had been banned by the government sent shockwaves through the international community, resurrecting fears that President Muhammadu Buhari is returning to his 1980’s authoritarian tendencies. It will also have had a negative impact on investor confidence in the tech sector.
The social media platform was a key element of last year’s #EndSARS protests. It is also a marketplace for thousands of small businesses that were immediately put out of business by the ban. However, like citizens in Uganda, where the government implemented a social media tax, the reality is that many shrewd Nigerian web-users will continue to Tweet by using a VPN.
But the damage to Nigeria’s reputation cannot be undone.
One to watch
Kenya-based Damu Sasa is working to solve the challenges within the human blood supply chain by providing a cloud-based, end-to-end blood services information management system. It aims to help hospitals source blood from donors and each other by managing inventory and the transfusion process.
The company raised $50,000 in June from India-founded Villgro Africa which launched in 2017 with a bid to support e-health startups across Africa. This adds to the $20,000 it received from Villgro Africa in December to help Damu Sasa mitigate the spread of Covid-19.
The rise and rise of Egypt’s tech scene
Often overlooked in comparison to anglophone markets like Nigeria and Kenya, Egypt’s tech scene has grown rapidly as one of Africa’s most vibrant startup markets. Only six months into the year and more than 50 deals have already been announced by Egyptian startups. Though deal volumes dipped slightly in February and March, funding has steadily increased since April.
Some of the largest raises this year include $18.5m from fintech Paymob and $42m from Egyptian trucking startup Trella. While e-commerce and fintech are the most popular sectors, there are more than 500 startups operating across the market in sectors as diverse as healthcare, education, media, e-commerce and entertainment.
So why is Egypt so successful? One explanation is that it has a highly educated domestic workforce due to good quality higher education facilities, often with a focus on STEM subjects. Another is that the market size of around 110m people provides startups with an easy route to scale.
Egypt is also well connected to MENA/Gulf funds and investors, providing a readily available pool of capital. In fact, many of Egypt’s startups will branch out into Gulf markets after establishing themselves at home. More generally, there are more than 150 investors that are focussed on the north African country from regions including Asia, Europe and North America.
Added to investors, Egypt also boasts a large number of accelerators, incubators and angel investors including Flat6Labs, HIMangel and The Cairo Angels. This means that there is ample help for startups looking to get off the ground both in terms of technical training and seed money. As well as foreign capital Egypt also has plenty of its own funds – including Egypt Ventures, AlgebraVentures and SawariVentures – that inject VC money to take companies to the next level.
Lastly, the Egyptian growth story is incredibly attractive to investors. Growing steadily since 2014, Egypt is projected to be the seventh-largest economy in the world by 2030, ahead of Russia, Japan and Germany. In terms of tech, it already boasts one unicorn, the payments company Fawry, and more are expected to follow.
To conclude – keep a good eye on Egypt. It will only get better.
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