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Venture Capital in Africa: Value of VC deals in Africa reached US$1.4bn in 2019; the highest on record
Between 2014 and 2019, 613 VC deals were reported in Africa with a total value of USD3.9bn. Notably, 2019 marked a six-year high in VC activity with 139 deals worth USD1.4 billion – the highest year on record.
The number of deals more than doubled between 2014 and 2019, while the value of deals almost doubled between 2018 and 2019.
This is according to a report by African Private Equity and Venture Capital Association (APEVC), dubbed Venture Capital in Africa: Mapping Africa’s Start-Up Investment Landscape,.
The report further shows that Southern Africa, East Africa and West Africa accounted for the greatest share of VC deals by volume, while multi-region deals attracted the largest share by value.
The report analyses the exponential growth of VC in Africa over the 2014-2019 period, focusing on deal trends. Despite the relative infancy of the VC ecosystem across the continent, the sector has attracted significant international investment while local VC firms and innovation hubs have also expanded considerably.
The report attributed Africa’s robust macroeconomic growth was a crucial driver of the continent’s VC industry; creating a positive economic environment that catalysed innovation, entrepreneurship and investment
The report further shows Southern Africa attracted the highest volume of VC deals (25%) in Africa between 2014 and 2019. Of those deals, 79% were headquartered in South Africa. East Africa accounted for the second-highest share of VC deals (23%), followed by West Africa (21%).
Multi-region VC deals accounted for the greatest share by value. An example of a large multi-region VC deal is the 2019 US$100mn Series D investment round in Andela, a company backed by TLcom Capital which currently operates in East, West, and North Africa and was also a member of Nairobi Garage.
South Africa attracted the bulk of VC deals from 2014 to 2019, representing 21% of the total number of early-stage investments. Kenya (18%) had the second-highest share of early-stage deal volume followed by Nigeria (14%).
One fifth (21%) of the total number of VC deals between 2014 and 2019 were in companies headquartered outside of Africa. However, these early-stage companies raised money to expand in Africa or further strengthen their African presence. Of these companies, the majority (53%) are based in the United States.
Share of number and value of VC deals in Africa, by sector
Also, in the mentioned period Financials (19%), Information Technology (19%) and Consumer Discretionary (18%) accounted for the largest share of VC deals by volume from 2014 – 2019. Deals in Consumer Discretionary (28%), Financials (23%) and Industrials (18%) attracted the largest share of VC deals by value.
Utilities is another sector that has been quite popular among early-stage deals, with investors being attracted by companies providing alternative power solutions. These companies accounted for a significant number of VC investment rounds from 2014 to 2019.
The report also highlights that the PE/VC Fund Managers (i.e. firms that have raised, or are currently raising, third-party PE/ VC funds from institutional investors), represented 39% of the total number of investors that participated in VC deals reported in Africa between 2014 and 2019.
PE/VC Investment Firms (i.e. firms that are not known to be investing through a fund structure, making mainly direct investments and do not fall into the other categories) accounted for 19% of the total number of investors, followed by Corporate Venture Firms (11%).
North American corporate venture firms played a key role in bridging funding gaps in Africa, accounting for a significant percentage (37%) of the total number of corporate venture firms that participated in VC deals in Africa from 2014 to 2019.
Share of investors participating in VC deals in Africa by region
Interestingly during the period, the report shows that foreign investors have been attracted by new opportunities and new markets in Africa. North American investors represented 42% of the total number of investors that participated in VC investments on the continent between 2014 and 2019, followed by European based investors at 23%.
African based investors accounted for 20%, followed by Asia-Pacific (8%) and investors based in the Middle East (6%).
Majority of the investors that took part in VC deals on the continent between 2014 and 2019 were US-based, representing 40%. South Africa (9%), Nigeria (4%) and Egypt (2%), which also constitute three of the most prominent VC hubs in Africa, were within the top 10 countries where investors that participated in VC deals on the continent from 2014 to 2019 are based.
There is also a noteworthy interest from Middle East-based investors into the African VC landscape. The United Arab Emirates was amongst the top 10 countries where investors that participated in VC deals in Africa from 2014 to 2019 are based, representing 3% of the total number of investors.
