Savannah Valley: Africa’s Startup Ecosystem
The African startup ecosystem has experienced a meteoric rise in the last decade. In 2018 alone, over $725m was invested across 458 deals, up from $528m in the previous year. Nigeria, South Africa, and Kenya lead the pack in terms of deal volume, with Lagos, Cape Town, and Nairobi topping the list of African startup ecosystems. Let’s look at some of the latest developments in three of the continent’s biggest startup hubs.
Nigeria
The startup ecosystem of Africa’s largest economy has made significant strides in the last few years; Lagos’ ecosystem alone was valued at $2bn in a 2017 study, the most valuable in Africa.
As Tosin Faniro-Dada of Lagos Innovates points out, the tech sector (especially fintech) dominates the ecosystem. “A number of multinationals have started to take a vested interest in the Lagos tech space. Facebook and Google are the most well-known examples, but IBM has partnered with the Lagos State Employment Trust Fund to implement a digital learning program that provides training in emerging technologies such as Cloud, AI, Blockchain, Data Science & Analytics, and Security.”
Nigeria’s cosmetic industry has also experienced a massive boom, and it is estimated to bring in ₦500bn ($1.38bn) annually. Dr Uju Rapu, founder of the Bel Fiore Aesthetic Clinic notes how African women “spend considerable amounts of money on beauty products.” Realizing this, she set about creating a medical aesthetics practice that deals with issues specific to African women.
Kayode Toju, a construction and logistics entrepreneur, explains how the government is getting involved: “By partnering with the private sector, the government is not only able to create new jobs, but is also able to contract out various infrastructure-related projects.” However sustainability is still a challenge: “quality standards can be inconsistent, and so we’re still some way off from making more use of environmentally-friendly practices.”
There is a large number of equity investors in Nigeria — the chart above breaks them down by the type of investor. Data from AlliedCrowds Capital Finder.
Kenya
Nairobi is perhaps the oldest and most developed startup ecosystem in Africa. As part of its commitment to staying ahead of the tech curb, the Kenyan government has allocated Sh12bn ($117.8m) to the creation of the Konza Technopolis. When complete, it will be the first smart city of its kind on the continent, boasting 5000 acres of commercial space, a data centre, and the Kenya Advanced Institute of Science and Technology.
Agriculture is a significant contributor to the country’s GDP, and Kenya now dominates the agritech sector with a 23.2% market share and over $24m of investment. One agritech entrepreneur is Rita Kimani, co-founder of FarmDrive. In order to address the lack of data required for financial institutions to carry out risk assessments for farmers, she and her co-founder Peris Nyaboe set up FarmDrive to “look at a variety of datasets for farmers, from basic information, to behavioral data, to whether they have access to a market.” This allows financial institutions to determine the creditworthiness of smallholder farmers.
Nairobi is the second-biggest hub for Impact Investors across the three countries we looked at, second only to Johannesburg. Data from AlliedCrowds Capital Finder.
South Africa
South Africa is Africa’s most developed startup country, in large part due to government support, and an established venture capital industry.
Fintech startups are ubiquitous, and many of them were founded with the intention of addressing structural problems in South Africa. Yoco, for example, is a point of sale payments company that allows small businesses to accept card payments, opening up their customer base and opportunities.
Much like the rest of the continent, there is a renewed interest in agriculture. Research analyst Nobuhle Hlangoti notes that political and economic developments — including a government commitment to creating 1 million jobs within the sector — have encouraged entrepreneurs to expand into the sector. Aerobotics, for example, is an agritech startup that uses drone imagery and artificial intelligence for pest and disease protection. Founders James Paterson and Benji Meltzer wanted to “help farmers leverage data to derive decisions that they could make to better manage their risk and crop.”
South Africa has the most geographically diverse investor ecosystem of the three countries: Johannesburg leads the way, but other cities have fairly established ecosystems in their own right. Data from AlliedCrowds Capital Finder.
Africa’s startup ecosystem continues to see significant growth. Indeed, the number of internet users has grown by more than 20%, tech hubs have increased by over 50% since 2016, and investment from multinationals like Facebook and Google are just some of the indicators that highlight the amount of potential the continent has.
For more interesting data insights, visit our Capital Finder: https://sdg.alliedcrowds.com/
