African tech startups secured record-breaking funding worth US$701.5 million in 2020. All this despite the downturn in the continent’s economy brought about by business shutdowns due to the pandemic.
The news was announced in the 6th edition of the annual African Tech Startups Funding Report 2020 released by startup news and research portal Disrupt Africa a Nairobi Garage Alumni.
“The growth in funding seen across the continent’s tech ecosystems in 2020 is extremely strong, and all the more impressive given the circumstances of the year given COVID-19 and its many implications,” said Gabriella Mulligan, co-founder of Disrupt Africa.
The report further shows that the figures are up substantially on the previous year, with the number of funded startups increasing 27.7 percent in 2019, and the funding total growing by 42.7 percent.
Disrupt Africa is making the 2020 edition open source for the first time, to make it accessible to those for whom the information is most valuable – African entrepreneurs.
It is part of an open-sourcing initiative in partnership with Catalyst Fund, RTB House, Quona Capital, 4Di Capital, Villgro Africa, Lateral Capital, and Otundi Ventures.
The report is available for free download here.
This year’s edition of the report counts at least 370 active investors, marking 42.8 percent growth on the previous year when the data tracked 261 investors. A 68.4 percent rise on the 155 investors found in 2018.
Kenya, Nigeria, South Africa, and Egypt remain emphatically Africa’s “big four” from a funding perspective, accounting for 77 percent of funded startups and 89.2 percent of total investment.
Nigeria (85), Egypt (82) and South Africa (81) lead the way from a venture perspective, but when it comes to total combined raised capital it is Kenya that is Africa’s leader. The startups from the East African country raised over US$190 million in funding alone in 2020.
Though these markets remain clear leaders, there are signs of growing activity elsewhere on the continent, with startups backed in 24 African countries, up from 19 in 2019, 20 in 2018, and 18 in 2017.
“At Disrupt Africa we’ve been tracking investment into the African startup ecosystem for six years now, and it is exciting to see our work and the work of so many others within the ecosystem validated by significant increases in the amount of investment that is available to founders on the continent,” said Tom Jackson, co-founder of Disrupt Africa.
The financial technology (Fintech) sector was, yet again, the most attractive to investors in 2020, with more startups securing funding than any other sector and a combined total that dwarfed all others.
In all, 99 fintech startups raised investment over the course of the year, representing 24.9 percent of the overall total, while the combined amount raised by fintech companies over the course of the year jumped 49.3 percent to US$160,319,065.
However, growth in fintech investment is slowing down to some extent as other sectors also had impressive years – notably e-commerce and retail-tech, e-health, logistics, energy, recruitment and HR, transport, and agri-tech.
Aside from providing a full list of the funded startups, who invested in them, and, where possible, the amount raised, from the previous year, the annual reports also provide deep-dives into investment trends. All within key startup geographies, and verticals, as well as data on African startup acquisitions.
“As African tech startup funding passes the $700 million mark for the first time, and more investors pump more money into more markets than ever before, there are no signs of the sector slowing down,” shared Mr. Mulligan.
Previously available for sale, the African Tech Startups Funding Report has been purchased each year by leading tech companies from Africa and the rest of the world.
The Big Four consulting firms, banking, fintech leaders, venture capital firms, supranational investors, and international trade bodies have previously formed the bulk of the buyers.
“This year’s edition of our funding report is especially exciting for us as for the first time we are able to give it away for free to anyone to whom it could be of benefit, and for that, we are extremely grateful to our many partners,” said Tom Jackson.
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Briter Bridges, also reported that African tech start-ups attracted $2.4 billion in 2020. According to the report, Fintech and solar companies attracted the biggest share of investment.
Finally, another report, by Baobab Insights stated that Angel and Seed stage funding saw the largest increase in the number of deals announced (increasing from 306 to 340 deals between 2019 and 2020). However, both early and late-stage investment decreased in terms of the number of deals (combined total of 99 in 2019 decreasing to 70 in 2020) and the amount raised (decreasing from a combined total of $1.55 billion USD in 2019 to $632.6 million USD in 2020).
In summary, though growth has slowed a little, the numbers represent impressive growth in 2019 in spite of the pandemic. It also means that the African tech startup funding ecosystem continues on its positive trajectory from a funding perspective.
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