Africa- A Rising Tech Ecosystem
The Long-Overlooked African Tech Ecosystem is on the rise, and this is why you should care.
Africa's tech ecosystem
The African Tech ecosystem has long been overlooked. African startups raised a grand total of $400 million in 2015, whereas startups in the United States alone raised over $100 billion the same year. However, Africa is one of the worlds fastest-growing tech markets , with a total smartphone usage of over 600 million, growing by over 20% in 2017 and significantly year after year. In the year 2020 African startups have raised over $2 billion according to Africa-focused fund Partech Africa.
2020 meant huge things for the African Tech Ecosystem, such as Sendwave’s $500 million purchase by WorldRemit, Network International buying DPO Group for $288 million, and Stripe’s larger than $200 million acquisition of Paystack.
The beginning of 2021 was similarly filled with big news such as Flutterwave reaching a $1 Billion valuation and becoming a unicorn 🦄, bringing the total number of African unicorns to four: Fawry, Flutterwave, Interswitch, and Jumia. Three out of the four African unicorns are fintech companies, with Jumia being the exception as an online marketplace. This in accordance with the overall trend in the African tech space, with African VC being dominated by just a few industries and investors. In fact, the composition of African VC deals by volume is concentrated in Fintech, Health Tech, agritech, and logistics & mobility, with these sectors making up over 50% of investments on the continent according to a recent report by the African Private Equity and Venture Capital Association (AVCA).
Foreign Investment Dominates the African tech scene
The African tech ecosystem’s recent profitability and youthful demographic have certainly not gone unnoticed by foreign firms. As Africa’s economic growth has accelerated, the interest of international investors’ interest has grown.
North American VC firms hold a considerable share of African VC investment, with Europe and Africa coming in second and third. 75 percent of investments in African tech startups come from firms in these locations.
In November of 2019, Chinese Billionaire Jack Ma went on a tour of African tech hubs, awarding an 'Africa Netpreneur Award' and announcing a $10 million African Young Entrepreneurs Fund. The China Africa Tech Initiative is dedicated to leveraging knowledge of the Chinese and African tech communities for the greatest impact on both ecosystems. Major companies such as Huawei, Tecno, ZTE, Tencent and Alibaba are making investments in countries from Nigeria to Kenya.
Twitter's Co-founder and CEO, Jack Dorsey, did a similar tour of Africa's entrepreneurial hubs in the same year, which led to his decision to further cement Twitter’s presence in Africa, picking Accra, Ghana as the headquarters location. Other North American tech giants including Microsoft and Google are heavily heavily invested in the continent as well. One recent Google initiative is Project Link, a mission to build links between undersea cables, ISPs and mobile networks. Its first metro fiber network rolled out in the Ugandan city of Kampala in 2015 and has expanded into Ghana, where it plans to build more than 1,000 km of fiber in Accra, Tema and Kumasi. In April 2019, Google opened their first African AI lab, in Accra.
Clearly foreign firms see the tremendous opportunity that is the African market, and local investment is likewise on the rise. One notable mention is Future Africa. Future Africa was launched in January 2020 to provide funding, coaching, and support for early-stage African startups. This came following founder and CEO, Iyinoluwa Aboyeji’s experiences raising funds for Andela and Flutterwave. A statement on Future Africa’s website claims that so far in 2021, it has invested $3 million — more than double its total investments in 2020 — in 13 startups, and fulfilled its commitment to investing at least $1 million in female founders. Future Africa runs a model that lets individuals invest a minimum of $5,000 yearly with an annual subscription fee of $1,000, while Limited Partners can invest up to $25,000 per quarter. My hope is for an increase in local African bred VC’s as the tech ecosystem continues to grow.