Who Funded What? Looking at VC Activity in Africa in 2021

As the world continues to navigate the ongoing impact of COVID-19, there has been increasing investment in the venture capital industry across the globe, amidst all the economic uncertainty that prevails. According to the EY Venture Capital Report, an estimated $200 billion was invested in venture capital globally as of the second quarter of 2021.

The VC industry in Africa has seen growth in venture-backed activity, with it reaching about $2.8 billion by the end of 2021 and it is expected to exceed $10 billion by 2025. While these sums may seem significant, the reality is less than 2% of global VC went to firms on the continent this year. Technology firms received a vast amount of funding with fintech companies taking the lead, having raised over $906 million by the third quarter of 2021.

The Org looked at some of the venture capital firms that invested on the continent in the past year with a particular focus on the fintech industry, as the most well-funded sector in 2021.

Some fintechs received unicorn status in 2021

Senegalese-based mobile money company Wave Mobile raised $200 million in a Series A round in September this year. The investment round was led by Sequoia Heritage, an endowment fund under Sequoia Capital that manages diversified portfolio investments globally. The firm received funding from existing investors being Stripe, Founders Fund, Ribbit Capital, former CEO of Y-Combinator Sam Altman and Partech Partners. Wave received unicorn status, as it is currently valued at $ 1.7 billion and is the first company in Francophone Africa to do so.

San-Francisco and Lagos based fintech company Flutterwave also gained unicorn status this year after raising $170 million in March, bringing total funding for the company to $225 million since its founding in 2016. The funding has allowed the company to expand its reach into more than 33 countries on the African continent and to broaden its product offering into other ecosystems such as e-commerce. The Series C round was led by Avenir Growth Capital and Tiger Global Management. Flutterwave was the first major investment into Africa for Tiger Global.

Yoco became the first payment platform and software company in South Africa to raise $83 million in July this year. The company will use the funding to expand its strong brand presence in South Africa to other markets in Africa and the Middle East. Head of Business Carl Wazen told TechCrunch earlier this year that there are 100 million SMEs transacting in cash across both regions, and that Yoco plans to reach at least a million within the next four years.The Series C round was led by Dragoneer Investment Group and saw new investors such as 4DX Ventures and Partech amongst others participate.

Retail aggregators attracted notable investments this year

Lagos based B2B e-commerce and embedded finance platform TradeDepot raised $110 million to offer over 5 million SME retailers buy-now-pay-later services and to expand its merchant platform across the continent. The platform has played a pivotal role in enabling consumer goods brands to connect with retailers and distributors, as 90% of retail sales occur within the informal market in Africa. The investment was co-led by the International Finance Corporation (IFC) and Partech Partners with Endeavor Catalyst and Novastar, being among the firms that participated in the funding round.

Kenyan B2B agritech marketplace Twiga Foods raised a Series C round of $50 million to expand its services of sourcing directly from farmers and FMCG companies to deliver primarily to small, informal independent retailers. The funding round was also led by Endeavor Catalyst, IFC Venture Capital Group as well as TLcom Capital Partners .

CEO of Google Sundar Pichai announced in October this year that the company will commit $1 billion over the next five years towards tech-led initiatives in Africa. Google recently launched its Africa Investment Fund, which will invest up to $50 million in high growth startups on the continent, with a focus on countries and regions that are receiving less funding currently. The Fund made its first investment in SafeBoda, a motor-taxi ride hailing app based in Uganda.

Improving the regulatory environment will help bolster venture capital in Africa

The Org spoke to TLP Advisory’s co-founder, Odunoluwa Longe, who highlighted how TLP Advisory has seen the VC ecosystem in Nigeria evolve from being very opaque, with term sheets often not working in favor of founders, to having greater transparency as a result of greater inflow of global funding. “What differentiates us as legal advisors is the practical and experiential insight we bring on board,” said Longe. TLP has expertise in advising founders and funders to forge mutually beneficial agreements when seizing market opportunities on the continent and served as legal advisors for the Federal Executive Council of the Nigerian Startup Bill.

Most startups that operate in Nigeria are not incorporated in the country given the low ease of doing business.The president of Nigeria approved the country’s startup bill on December 15, 2021,which many believe will unlock the startup ecosystem’s full potential. Kenya and Tunisia passed their Startup Bills earlier this year and South Africa is currently driving huge advocacy for its Startup Act.

Partech’s 2020 Africa Tech Venture Report outlined how there will be a sharp increase in venture capital in 2022 with an estimated $3.8 and $ 4.7 billion to be deployed in the local tech sector.

We hope to see more exits that don’t just provide meaningful returns but have an impact proponent attached to them, to address the many pressing challenges in Africa that also serve as meaningful opportunities for investment.