By Max Cuvellier
The start-up funding globally has grown +92% YoY in 2021, reaching a staggering US$ 643 billion. Start-up funding in Africa still represents only a fraction of this amount -0.6%, far below the continent’s share of the global population and GDP (16% and 3% respectively). Though encouragingly, the amount is growing faster than the global average: +150% YoY, from $1.7bn in 2020 to over US$4.3bn in 2021.]
The total funding raised, however, is not equally distributed. As a matter of fact, four of the continent’s 54 countries have attracted 81% of the VC funding raised by start-ups in Africa in 2021 (US$3.5bn). Nigeria leads this ‘Big Four’ group with over US$1.5bn raised, 36% of the total amount raised in the region. This achievement is fuelled by a very strong performance from Nigerian fintech start-ups who claimed 1 in 5 dollars raised in Africa in 2021, along with the largest deal of the year: OPay’s US$400m Series C (see below). South Africa registered US$945m of start-up funding in 2021, followed by Egypt (almost US$600m) and Kenya (US$411m). Senegal also had a very strong year with US$222m raised – up from just US$8.5m in 2020 – though most of this amount (US$200m, 90%) belongs to one deal: Wave’s US$200m Series A. The number of US$100k+ deals in the market (18 in total) remains much below that of the ‘Big Four’ (Nigeria: 232; South Africa: 126, Egypt: 134; Kenya: 131), and as such Senegal cannot yet claim a spot in a so-called ‘Big Five’. A further ten countries recorded over US$10m of funding raised in 2021, though not all are comparable. For instance, the US$30m raised in Algeria were raised through a single deal, while Morocco’s similar performance amount-wise (US$29m) was built upon 19 deals. Ghana registered the highest number of deals outside of the ‘Big Four’: 40 deals, for a total of $49m raised. An extra fifteen countries recorded some founding activity in 2021, bringing the total to 30, which also means there were 24 markets in which not a single US$100k+ deal was announced during the year.
The US$4.3bn+ raised in 2021 were secured from more than 800 unique investors, through at least 818 deals. Twelve of those were ‘mega deals’ (US$100m and over), a sharp increase compared to 2019 (3) and 2020 (2); they attracted a combined $1.9bn. From a sector point of view, fintech kept dominating the funding landscape, claiming more than half of all the funding throughout the year (US$2.3bn).
In order to bring this VC funding activity on the continent to life, I will be highlighting three deals every quarter that I believe illustrate notable trends and/or are particularly relevant to an audience interested in the relationship between Asia and Africa.
As mentioned earlier, in August 2021, fintech start-up OPay raised a US$400 million Series C round at a US$2 billion valuation to finance its expansion in Africa and the Middle East. This deal is the largest Venture Capital deal recorded on the continent to date. It is of particular significance to Asian investors and observers as OPay was created by Opera in 2018, after the Norwegian company was acquired by a consortium of Chinese investors led by billionaire Zhou Yahui in 2016, who is now CEO of OPay. OPay’s previous round ($50m, July 2019) had been led by China-based investors Sequoia Capital China, IDG Capital and Source Code Capital. The Series C was led by SoftBank Vision Fund 2 and as such was SoftBank’s first large high-profile investment on the continent. Other investors include previous round’s leads Sequoia Capital China and Source Code Capital, Redpoint China, Softbank Ventures Asia, DragonBall Capital and 3W Capital. The predominance of investors from Asia – and China in particular – in this round is rooted in OPay’s unique history and remains an exception in a continent where deals still mostly involve ‘Western’ and African investors.
That being said, SoftBank Vision Fund 2 also led the second-largest deal on the continent in 2021: Andela’s US$200 million Series E round in September 2021 (a tie with Wave’s US$200 million Series A earlier that month). Launched in 2014, Andela selects and trains local engineers in low- and middle-income countries – it until recently focused exclusively on African talent, before finding them remote placements with start-ups and tech companies located in the US and beyond. Through this deal, the company was valued at US$1.5 billion, therefore gaining ‘unicorn’ status. This deal is worth highlighting as Series E remain uncommon on the continent. The vast majority of ‘mega deals’ are also usually signed by fintech ventures. Beyond SoftBank Vision Fund 2, investors in the deal included past investors and newcomer Whale Rock, all US-based. Andela’s US$100 million Series D round back in January 2019 had been led by Generation Investment Management – an investment firm co-founded and chaired by former US vice president Al Gore – and included Chan Zuckerberg Initiative, Google Ventures, Spark Capital, and CRE Venture Capital as investors.
Finally, though not a ‘mega deal’, Gro Intelligence’s US$85 million Series B round announced at the very beginning of 2021 is also worth noting. Founded in Kenya and with offices in Nairobi and New York, the company uses machine-learning to deliver localised insights on food, agriculture and climate risk to clients around the world. ‘Deeptech’ investments – especially of this size – are still unusual on the continent; and the company is quite unique in that it serves a global audience, with services very relevant as the effects of climate change are deepening. Their CEO was singled out as one of Time’s 100 Most Influential People, and remains one of the very few female CEOs to have raised large rounds in Africa, where 93% of the funding went to male CEOs in 2021. The round was co-led by heavyweight Intel Capital, Africa Internet Ventures (a strategic partnership between TPG Growth and EchoVC), and the family offices of Ronald Lauder and Eric Zinterhofer.