Is Africa Doing Enough to Catch Up With The Global VC Landscape?
The U.S. is the world’s monopoly for venture capital, accounting for more than half, 51 percent (USD 132.9 Bn) of total global venture capital. Is Africa doing enough to catch up?
In 2020 according to Disrupt Africa, the continent attracted USD 700 Million worth of investment to African tech startups. Depending on tools and methodology adopted some sources estimate the number can go up to USD 1.3 Billion disclosed and undisclosed amounts. The KNGS; Kenya, Nigeria, South Africa, and recently, Egypt still has the largest share of the deals absorbing more than USD 600 Million, more than 75 percent of all the capital going to startups in the continent led by Kenya at 27 percent, Nigeria at 21 percent and South Africa and Egypt both at 20 percent.
While across all the sources WeeTracker, Partech Partners, Disrupt Africa, and Briter Bridges are showing positive growth in terms of year on year (YoY) growth of VC funds coming to the continent, capital in Africa is still not evenly distributed and the amount of capital coming into the continent is still significantly low compared to US, Asia, and Europe. There is a need to encourage the further flow of capital by strengthening systems and structures that will encourage attracting investment from the regional and global landscape by strengthening local investment infrastructure.
The Global VC Landscape
The U.S. is the world’s monopoly for the value of venture capital financing worldwide. According to data captured in the last quarter of 2020 by CB Insights/PWC in the MoneyTree Report. The North American region accounts for more than half, 51 percent (USD 132.9 Bn) of total global venture capital, followed by Asia at 33 percent (USD 87.1 Bn) and Europe with 13 percent (USD 33.4 Bn). Africa follows under the rest of the world category who shares roughly 2 percent (USD 6 Bn). Interestingly, cities like San Francisco with a population of fewer than 1 million people attract almost 10 times compared to what the continent absorbs in a year.
According to PWC, The Francisco Bay Area remained the top location in Venture Capital (VC) spending in 2019, accounting for approximately 44 percent of U.S. spending or approximately 22 percent of global spending. This is almost four times what the rest of the world is getting if you exclude Asia and Europe.
According to Global Data, North America accounted for 37.9% of global VC investment volume in Q4 2020, followed by APAC with 33.5% and Europe with 23.2% share. The Middle East and Africa, and South and Central America garnered 4.2% and 1.3% shares of VC investment volume, respectively. Both reports and analysis showed the volume of VC investment coming to the continent is still significantly low compared to what goes to the US, Asia, and Europe.
Africa Major Deals
In 2020 we witnessed acquisitions happening with crazy numbers; Network International Acquiring DPO Group for 288 Million USD, Stripe acquiring Paystack for 200 Million USD, WorldRemitt buying Sendwave for 500 Million USD, and the most recent one in the first quarter of 2021, Flutterwave raising 170 Million USD from multiple investors led by Avenir Growth Capital and Tiger Global.
Other major deals of 2020 include; MetroFibre Networx USD 97.6 Million Equity Funding from Africa Infrastructure Investment Managers (AIIM) to expand their operations. Jumo $55 million Series C in debt and equity, an investment round led by Goldman Sachs, Odey Asset Management, and LeapFrog Investments making the total investment attracted by Jumo to USD to USD 146 Million so far. CrossBoundary Energy raised USD 40 Million in equity financing from ARCH Africa Renewable Power Fund (ARPF).
Vezeeta raised USD 40 million Series D investment from Gulf Capital and Saudi Technology Venture. Flutterwave raised USD 35 million Series B investment round led by Greycroft, this was before its current round of USD 170 Million USD. Lumos Global raised USD 35 million from the United States International Development Finance Corporation. Skynamo raised USD 30.1 million Series A from US-based investor Five Elms Capital. Chipper Cash raised a USD 30 Million Series B round led by Ribbit Capital, with the participation of Bezos Expeditions.
In conclusion, even though the recent growth of the VC landscape is creating optimism, by global standards there is a lot that needs to be done to catch up. The continent can not afford to settle for less. Infrastructure needs to be created that further encourages regional and global investors to invest in startups from the continent. Issues around the legal and regulatory environment, skills and talents, lack of data and insights, local investor networks, and political stability needs to be addressed if we are to reach the next phase of growth in the sector.
Disclaimer | Information gathered in this article has been captured from different sources online. The accuracy and completeness of such information expressed herein cannot be guaranteed. Opinions are subject to change without notice, and Sahara Ventures assumes no responsibility to update or amend any information or opinions contained herein.