African Startups are Increasingly Attractive to Investors

In 2016, African or Africa-focused startups raised between $129 million and $367 million, according to reports from Disrupt Africa and Partech Ventures.

Perhaps unsurprisingly, given promising macro trends across African markets (e.g., increasing mobile/smartphone/internet penetration rates, a gradual rise of the middle & consumer class, rapid urbanization, and strong working-age population growth), the momentum continues into 2017 with entrepreneurs and investors in Africa & beyond continuing to explore and exploit opportunities for progress and profit across the continent.

Africa-Focused Ventures Receiving Significant Funding in 2017

The list below, while non-exhaustive, provides a relatively thorough overview of tech- and internet-enabled ventures operating in Africa that raised significant equity funding ($500,000 and up) in the first half of 2017, plus July:

• UNICAF, an online education platform & operator of higher education learning centers, raised $12 million from Kenya’s Savannah Fund, New York’s University Ventures, and UK development-finance institution, CDC Group.
• Kenya’s Twiga Foods, a B2B m-commerce platform, raised a $10.3 million Series A round led by Dubai’s Wamda Capital.
• Flutterwave, an API-driven fintech platform, raised a $10+ million Series A round co-led by New York’s Greycroft Partners and San Francisco’s Green Visor Capital, with Silicon Valley’s Y Combinator also participating.
• Nigeria’s Cars45.com, an online marketplace for used cars, raised a $5 million Series A round from Berlin’s Frontier Car Group (a holding company backed by London’s Balderton Capital, London’s TPG Growth, Lagos’s EchoVC, and Silicon Valley’s NEA.)
• Kenya’s PowerGen, a renewable energy provider, raised a $4.5 million Series A round led by Dutch family office, DOB Equity with Kenya’s AHL Venture Partners also participating.
• Morocco’s WaystoCap, a cross-border B2B e-commerce platform, raised ~$3 million from Silicon Valley’s Y Combinator, Waltham’s Battery Ventures, Silicon Valley’s Soma Capital, New York’s Palm Drive Capital, Palo Alto’s Amino Capital, New York’s Story Ventures, San Francisco’s Lynett Capital, and others.
• Kenyan-headquartered BitPesa, a virtual currency payment platform, raised a $2.5 million Series A round led by Silicon Valley’s Draper Associates, with participation from New York’s Greycroft Partners and others.
• South Africa’s HearX, a hearing-focused digital health firm, raised a $2.8+ million seed round, including $500k in grants.
• Nigeria’s Tizeti, a high-speed wireless internet provider, raised $2.1 million from California-based venture-debt firm, Western Technology Investment, Silicon Valley’s Social Capital, Dubai’s Vy Capital, San Francisco’s Lynett Capital and others.
• Kenya’s Alternative Circle, the fintech-focused parent company of mobile micro-loan app, Shika, raised a $1.1 million strategic investment from Iceland-based credit risk management company, Creditinfo Group, related to data generated.
• Kenya’s Bamba, a mobile-driven data collection startup, raised a $1.1 million seed round from Silicon Valley’s Draper Associates, Colorado’s Foundry Group, San Francisco’s Right Side Capital, and others.
• Ghana’s OMG Digital, a viral media company, raised a $1.1 million seed round from San Francisco’s Comcast Ventures, Silicon Valley’s Soma Capital & Social Capital, and others.
• South Africa’s Aerobotics, a data analytics company leveraging drones, raised a $600,000+ seed round from Kenya’s Savannah Fund and South Africa’s 4Di Capital.
• Kenya’s EatOut, a restaurant discovery media platform, raised a $500,000 strategic investment from fintech firm, Craft Silicon, related to the platform’s payments technology.
• Uganda’s Ensibuuko, a provider of cloud-based finance software for non-bank financial institutions, raised $500,000 from Canadian investor, Ed Levinson.

Tanzania’s Jamii, an m-health insurance provider, also raised a $750,000 seed round, reportedly comprised of 50% in grants.

Though perhaps not as driven by tech as the ventures above, it’s also worth noting that Kenya’s Africa Logistics Properties, a developer, acquirer, and manager of logistics warehouses, raised $4 million from Dutch family office, DOB Equity, and Nigeria’s Tomato Jos, an agricultural production company, raised $2.1 million from VestedWorld.

In addition, Tala and D.Light, which target African markets but have significant operations elsewhere, also received funding in 2017. Tala, a provider of smartphone-based micro-loans, raised a $30+ million Series B round led by Silicon Valley’s IVP, with participation from New York’s Collaborative Fund & Lowercase Capital, and others, and D.Light, an off-grid solar energy solutions provider focused on Africa & Asia, raised $5 from Norway’s Norfund. (Iflix, a subscription video-on-demand service, and Taxify, a ride-hailing Uber competitor, which are both present in African markets, also raised significant rounds.)

Emerging Themes

Looking closely at the list above, a few themes emerge:

• Fintech in Africa, particularly payments and lending, is red hot.

Fintech players Flutterwave, BitPesa, Alternative Circle, and Ensibuuko all raised significant amounts in 2017. With Africa-focused fintech startups raising $30-70 million in 2016 (approximately one-fifth to one-fourth of total funds raised by African startups in 2016 across all sectors), including Zoona’s $15 million Series B and Branch International’s $9+ million Series A, the sector continues to receive significant investor attention. In all, African fintech startups have raised in excess of $100 million since 2015.

• Some international investors are betting big on Africa.

Among the list of investors above a few names are quite active in Africa, appearing multiple times. Draper Associates, led by Tim Draper, invested in both BitPesa and Bamba in 2017. But that’s not all. Tim Draper was among the earliest investors in Nigeria’s Paga in 2012, and through Draper Dark Flow, alongside Toro Orero, he has invested in various startups across the continent including Nigeria’s Paystack, South Africa’s SweepSouth, and Ghana’s Swiftly. (Draper and Orero are also involved with the African Startup Institute, launching in March 2018, which will offer personalized entrepreneurial training in Lagos, Nigeria.)

New York’s Greycroft Partners also appears multiple times, with Ian Sigalow, Partner & Co-Founder, saying recently:

We’ve always believed in the potential of the market. I expect we make more investments in Africa over the next five years than the last 10.

In addition, Silicon Valley’s Y Combinator, Soma Capital, & Social Capital, as well as San Francisco’s Lynett Capital (also an investor in Flutterwave’s 2016 seed round) all appear more than once. As does Kenya’s Savannah Fund.

• Other Themes:
• The emergence of strategic early-stage investments (see: Alternative Circle & EatOut)
• Investor interest in innovative data startups (see: Bamba & Aerobotics)