The first day of the Africarena Summit in Southern Africa was packed with insightful advice for founders who are still at an early stage of their businesses. Zack George who leads Launch Africa delivered the keynote address which highlighted some of the key things founders can do to get ahead in the African continent. George has been an active investor across the continent with some of the most innovative companies. In responding to some of the questions from the founders about making money he pointed out that “making a dent in the universe is more important than making money”. He encouraged founders to be consumed with the process of solving problems and making an impact in society.
Some of the companies that attended the first day of the summit also had an opportunity to pitch their ideas to a pool of investors in attendance. One of them, Smartfill, presented a solution and a machine that may just end the need for plastic packaging in retail. The highlight of the morning session was the launch of Africarena’s State of Tech in Africa report. According to the report, 2021 was a record-breaking funding year: for economies, industries, businesses, and communities around the world. The number of deals almost doubled, increasing by 92% YoY. According to the report, this rate of growth makes African tech one of the fastest-growing ecosystems in the world. The report points out that in 2021 it accelerated significantly, far outstripping the past 6 years’ growth with a CAGR of 45%.” The report also indicates that in Africa above $100,000 deals are still being dominated by investors who are not headquartered in Africa, taking up 70% of deals made in 2021. It goes on to add that few local investors see the value being produced on the African continent, on the flip side the overall benefit of Foreign Direct Investment (FDI) for developing country economies is well documented.
Given the appropriate host-country policies and a basic level of development, a number of studies show that FDI triggers technology spillovers, assists human capital formation, contributes to international trade integration, helps create a more competitive business environment, and enhances enterprise development. All of these contribute to higher economic growth, which is the most potent tool for alleviating poverty in developing countries. Moreover, beyond the strictly economic benefits, FDI may help improve environmental and social conditions in the host country by, for example, transferring “cleaner” technologies and leading to more socially responsible corporate policies.
The report also shines a spotlight on the top 5 Investors in Africa who were led by Launch Africa securing (44+ deals in 9 markets), Kepple Africa ( 31+ deals in 7 Markets ), Y Combinator ( 27+ Deals in 9 Markets ), LoftInc ( 23+ Deals in 5 Markets ), and Flat6Labs ( 19+ Deals in 2 Markets ) have been involved in 1 in 3 early-stage deals mostly within Fintech, Logistics & Transportation and Healthcare. Last year we saw debt funding emerge as a new asset class for funding, taking a total of 7% of funds raised in Africa over the past 10 years.
In terms of startups, the story keeps getting better. 37 Startups raised $767M in over 43 debt rounds. 2021 saw a record year with Mega Deal-rounds raising over $100M. Between all the reports, there were 12 to 14 Mega-rounds that took place last year including OPay, Zepz, Zipline, Andela, Wave, Flutterwave, Chipper Cash (x2), Tala, MNT-Halan, JUMO, TymeBank, PalmPay, and an undisclosed round from one of these companies. Africa’s most valuable unicorn Flutterwave raised $250M in Series D.
