The African Startup Landscape: The NewGen Angels H1 2016 Review.
In 2016 major investments have taken place, putting Africa on the global tech map. Jumia Group became the first African startup unicorn, gaining over $410m investment this year alone from institutions such as Goldman Sachs and Orange. Relatively new market-entrant Andela received $24m Series B funding from the Chan Zuckerberg Initiative. Startup activity continues to be led by four key regions: Nigeria, South Africa, Kenya and Ghana. In our H1 2016 review, New Gen Angels profiles some of the newest startups with bold ambitions to transform life on the continent and beyond. We also explore the crucial role that accelerators play in nurturing talent and as a key source of funding for the African founder.
(Caption: following a reported $185m raised in 2015, the region shows no signs of slowing down this year)
New players: How smaller, younger businesses are making their mark on the continent
Amidst the multi-million investment deals, it is important to remember that these companies began as an idea. An idea conceived by bold visionaries who recognised and pursued the potential they saw. It seems that the continent is not short of these thinkers, as the new businesses emerge constantly, with the mandate to make business and daily life easier for millions citizens across the continent.
- An example of this is Shuttlers.ng, a recently launched startup seeking to transform the daily Lagos commute. With routes connecting towns on Lagos’ mainland to the business district of Victoria Island, pre-booked seats on each bus and internet-access for Premium travellers, Shuttlers will ease the stress of commuting Nigeria’s most populous city. Shuttlers has been selected for the upcoming She Leads Africa Accelerator programme, which will give them access to leading mentors and training to take the business to the next level.
- From consumer transport to cargo, Swiftly and Shypmate are transforming how we shift good across from across the atlantic. Shypmate facilitates peer-to-peer model by connecting buyers with people travelling in and out of the continent. This is mutually beneficial as buyers save money on shipping costs and complexities, and travellers have the opportunity to make enough money to subsidise their flight tickets. Shypmate has been selected for Y Combinator’s Winter 2016 class, reportedly gaining an investment of $120,000. Similarly, Swiftly also leverages the concept of the sharing economy by connecting users with those who have space for additional items in cargo, packages or delivery vans. Swiftly was one of the 8 startups to receive investment at the end of SpeedUp Africa’s 4-day boot camp earlier in July.
- On the theme of community building, Tress is building a community where black women can explore new hairstyles, get advice and reviews on hairstylists or products. With an eye on the $500bn global black haircare market, Tress industrialises an industry that has been largely localised and based on word of mouth. The founders have been trained extensively; having completed the 2-year MEST programme and receiving investment from SpeedUp Africa alongside Swiftly, Tress has now joined the Y Combinator’s 8-week Fellowship Programme gaining a further $120,000 in investment.
Caption: MEST Class of 2016. Source: meltwater.org
- Media continues to be one of the continent’s leading industries, especially in regions of high economic growth. Nigerian digital agency, S&T Media received further investment from EchoVC, to the sum of $1m. Cocktail Insights also works with businesses to quantify the ROI of their marketing and advertising efforts. The team has recently completed the 2 year MEST fellowship programme, and has developed an offering that helps inform users’ future content strategies.
- Improving education and access to legal support. In January, BRCK announced that they received a further $3m in investment take its ‘rugged’ and constant internet access to the classroom and scale the overall business. Newly founded DIYLaw, recently received $40,000 from the Innovation Justice Award for SME Empowerment Innovation Challenge East and West Africa. In regions where access to sufficient legal advice is unaffordable, DIYLaw seeks to close that gap for millions of businesses by providing online guidance for the essentials like company incorporation forms and mutual NDAs.
Looking ahead: the future of the African startup ecosystem.
The examples above provide a glimpse into how new startups are ambitiously closing infrastructural and social gaps across the continent. Established organisations like MEST are now considering expansion outside of Ghana to adopt a pan-African approach to investment, in order to capture all opportunities. As this year’s SpeedUp Africa bootcamp closed, 8 companies received funding in addition to Swiftly and Tress; payments platform VugaPay, sports data hub Planete Sports, VeriCampus that brings mobile data to schools, crowdsourced errands hub Drop Buddies, free wifi provider Nurlux and on-demand TV provider TrendingshoW (TW). Against a backdrop of multi-million dollar investments and seed funding for newer startups, prospects in Africa remain strong. For example, firms such as Capital Eye are planning to raise $100m for sub-Saharan startups. It is predicted that in 2018, $600m investment will be made into the continent in that year alone, excluding debt and grant investments.
Recently — M-Kopa — the startup that provides affordable and consistent electricity to the growing population of mobile users in Africa, gained access to a new unique type of finance. M-Kopa secured a $4m credit note to finance their working capital, a unique investment vehicle which was made possible by a Liechtenstein investment bank and City law firm Kerman & Co. This credit note will enable M-Kopa scale their business and supply an estimated 80,000 additional homes. While this may be the beginning of a new wave of sophisticated finance options for African startups, it is likely that they will be limited to businesses with a strong track record in order to attract ultra high net worth and institutional investors. (By the end of 2015, M-Kopa had raised over $60m in investment in various rounds).
Lagos Angels Network also made investments into CafeNeo and BigCabalMedia
Nevertheless, for the early-stage African founder, access to funding remains a challenge. In a recent report by VC4A, it was found that 57% of businesses are still driven by founders’ own funds, which can be a strain on those with low access to capital. While bootstrapping does encourage ingenuity and prudence, there is scope for greater angel and VC investment, which only accounts for 9% and 3% of funding, respectively. Accelerators and incubators play an integral role in the continent, as startups that take part in these programmes are twice as likely to close successful funding rounds. The need for funding is great, and the continent calls for ambitious investors who will support an idea through and guide it through the journey of becoming a household name.
The Africa Angel investors survey
NewGen Angels in partnership with Ongeza Fund are conducting a study on the Africa angel investor landscape in 2016.
The objective is to provide a comprehensive study that will show the emerging trends in the industry and highlight topics including the needs of angel investors in deploying capital across the continent, their liquidity goals and achievements, and the impact of their investments. Please take part here
Africa Private equity landscape: fundraising,deals and exits
More more information on the state of funding in Africa please, visit the following reports:
- The Landscape for Impact Investing in Southern Africa, 2016
- The Africa Private equity landscape 2016
- VC4Africa 2015 Report: Venture Finance in Africa — Progress In Africa’s StartUp space, 2015
- The Mobile Economy, GSMA Intelligence 2016
Events and other highlights :
Highlights
1)Meet 6 women leading Africa Digital revolution.
2)Africa leapfrogs with the KINGS (Kenya,Ivory Coast,Nigeria,Ghana and South Africa )
3)Okun Beachwear early investor access
If you missed out on the Africa Technology Business Forum, here are the photos and the audio on Bridging the Africa Funding Gap.
Events:
Following the inaugural Africa Business Angel forum in March 2016 where two new funds were announced the next forum will take place on the 9th September in London , Find out more and get involved The Africa Business Angel Forum.
Last but certainly not the least, we would like to thank Abiola for all the efforts put towards this review.
Abiola Babarinde is a management consultant and writer based in London. She has worked with a range of leading global companies and her writing focuses on business, personal and professional development. Connect with her on medium.com/@abxola.
NewGen Angels is an active participant in this market and an exclusive international investment Club of New Generation of Angels focusing on Africa, combining skills with funding. For more information visit newgenangels.com.
This report was updated on 1 August 2016.
