Tech startups in Nigeria have finally ditched the shadows of their South African counterparts to emerge as hottest investors’ toast in Africa, according to Disrupt Africa’s latest report.
The African Tech Startups Funding Report released on Monday, 28 January, shows that 58 startups in Nigeria raised a total of $94,912,000 (Ninety four million, nine hundred and twelve thousand dollars) to take the top spot from South Africa which has 40 businesses raising $59,971,000 (Fifty nine million, nine hundred and seventy one thousand dollars). Kenya maintained its third position.
2018 in total outshined previous years as 210 startups brought in $334.5 million worth of investments into Africa.
Nigeria came out tops on number of funding recipients and total amount of funding making, 2018 the biggest year on record.
“The findings of the report show that investor appetite is growing year on year, with more funding going to startups spread continent-wide,” Gabriella Mulligan, co-founder, Disrupt Africa told BusinessDay via mail. “Investors are becoming ever more confident participating in deals in Africa – and are seeing real opportunities in the innovative solutions and solid businesses offered up by Africa’s entrepreneurs.”
Gabriella noted that a lot of the progress and most of the big fundraising rounds in Nigeria were in the fintech space.
“With the continent’s biggest population and lacklustre financial services uptake to date, Nigeria presents a huge addressable market which is a major opportunity for entrepreneurs and investors alike. The country has a tech-forward youthful population which is pumping out success stories – particularly in the tech and fintech spaces – year by year. As such it is no surprise investors are growing more confident in backing talented Nigerian startups,active in a market with such opportunities,” she says.
She further noted that investments are spreading to more countries in Africa with tickets over the $1 million mark rising as well. The report showed that 16 African countries secured investments. The growth is expected to continue in 2019.
Prior to 2018, the three of South Africa, Nigeria and Kenya accounted for more than 80 per cent of total funding raised. This dropped in 2018 to 61.8 per cent driven by the rise of Egypt as a destination for funding. The country’s startups raised $58.9 million in 2018. Interestingly, the biggest round went to Cairo-based transportation startup Swvl.
Swvl, in November 2018, raised an undisclosed amount in a Series-B funding round led by Dubai-based venture capital (VC) firm BECO Capital. The Forbes later reported that the funding was in “tens of millions of dollars”. Other investors that participated in the round include Raed Ventures, Arzan VC, Sawari Ventures, Oman Technology Fund, Dash Ventures, Esther Dyson, chairman of EDVentures Holdings and Emilian Popa.
The fintech segment continued to dominate as investors poured in $132.75 million into startups within the space, representing 39.7 per cent of total funds raised.
“This was an increase on previous years, but nonetheless there are strong signs of progress in other sectors, with multiple ed-tech, e-commerce, e-health, transport, logistics and agri-tech startups raising funding as investors saw opportunities in a large number of areas,” wrote Tom Jackson, co-founder of Disrupt Africa in a blog post.
Jackson acknowledges that inasmuch as investment levels are not the only way of gauging the health of local ecosystems, they are a valuable way of following the sector’s progress, “and demonstrate that, increasingly, if you have an innovative tech solution to a problem, with a strong business model, there are pathways to funding should you require it to scale.”