By Zekarias Amsalu, Co-Founder – Africa Fintech Summit, Founder & CEO – Ibex Frontier
The African startup funding statistics for 2021 proved that investors have ‘smelled the coffee’ in the continent and “the international investor community is becoming increasingly aware that those who misunderstand Africa risk missing the greatest growth opportunity of the 21st century”, as my colleague Andrew wrote in his editorial in June 2021! Total disclosed Startup funding for 2021, standing at $4.6B, is an all-time high with +150% YOY increase and larger than the funding amounts of the preceding three years (2018–20) combined.
Dissecting the yearly investment statistics provides emerging new trends and indication where the startup ecosystem will head for the years to come. I will highlight few trends to provide the rationale into my 2022 predictions for the African tech ecosystem and a note to the investing world.
- First, not surprising though, the Briter Bridges Africa Investment Report 2021 described the African investment landscape in 2021 can be as “Fintechs, Fintechs everywhere!” Around 62% of the total funding on the continent and 2/3rd of all $50M+ deals went to fintechs.
- Mega deals of $100M+ are now the new normal as evidenced by the dozens of newsworthy deals last year! This in turn has pushed additional African startups into the ‘unicorn’ territory. While fintechs accounted for 41% of these mega deals, a new emerging sector, Logistics & Supply (Supply Chain), has taken the second lion share at 14%, indicating a building trend accompanied by the AfCFTA & the commercial launch of PAPSS.
- A significant jump in investment of Pre-seed, Seed & Pre-Series A stage startups with ticket sizes of $100K to $5M is a belated welcome to the ecosystem. Africa’s future tech giants are being seeded and watered well now and the ‘too many investors chasing too few deals’ narrative is quashed for the foreseeable future.
- The 2021 year has shown a seismic shift in the source of capital with some 62% of growth capital coming from the US, typically from funds in EMEA, followed by Europe, signaling that ‘overly cautious’ US investors have set-aside pre-conceived risks in startup technology investments. 2021 also welcomed Jack Dorsey’s Square Venture investing in an African Fintech while Jeff Bozz, Goldman Sachs, Ribbit Capital, Stripe, Quona Capital have invested in earlier years among others. The first three weeks of 2022 also showed Citi and Google joining the startup investment in Africa!
- Finally, the number of investments by home grown funds and investors has skyrocketed! It was thrilling to watch tech founders turned entrepreneurs leading several investment rounds with institutional investors following the round.
With such a record-breaking year as a springboard, this is my prediction for the African startup & technology space for 2022.
- Total Investment reaches $10B USD. I expect a total Investment funding amount surpassing $10B including debut public fundraise in a form of SPAC and/or IPO.
- 2 African IPOs in the US. At least 3 African unicorns have already publicly expressed of their intent of a US IPO/listing, and there are other startups vying to do the same. The significant shift of US private capital flowing to African tech space is a preclude to public fundraise in a form of IPOs. Paraphrasing what I said back in October 2020, “the US private tech investment’s ‘dating expeditions’ will lead to ‘I do’s’ in the form of US listing/IPO or SPAC deals.”
- Africanization of global tech. African startups will continue to have global expansion ambitions and execution strategies from inceptions and their unique proposition tested and scaled in Africa will be a huge asset in their global accession in the years to come.
- Afropreneurship is strong. African seed investors, founders-turned-investors and Afropreneurs with deep local expertise will continue to lead the pack in deal sourcing, seed investments and growth stories. The likes of Future Africa, Launch Africa and other emerging fund managers are good examples while platforms including YC, TechStars Toronto, AFTS Alpha Expo provide good early stage investment opportunities. This prediction also comes with a note to global LPs and Investors: Those who invest in African GPs and co-invest with local tech investors can expect handsome return in the quality lead pipelines as proven several times in India that has gone through the phase Africa is in currently!
- Cryptocurrency’s future is being defined in Africa. Central Bank Digital Currencies, blockchain-technology enabled deployments, and increasing rates of cryptocurrency usage are accelerating. The young tech-futurists at the ฿Trust Fund, funded by Jack Dorsey and Jay-Z, will spearhead operational principles and adoption of virtual cryptocurrency in the continent and this will be one space to watch out.
- Pan-African Payment Settlement System (PAPSS). The Commercial launch of Pan-African Payment and Settlement System (PAPSS) in Jan 2022 will be monumental in the continent’s financial, trade and payment space. Those startups and tech companies that adapt, adopt, and capitalize on PAPSS will be riding the ‘Shinkansen’ – bullet trains as called in Japan – to success and cross-border growth!
As the industry has already raked in over $1B in the first 2 months of 2022, we look forward to witnessing another record-breaking year of tech investment in Africa – led by fintechs! As we say in Swahili, “Kuwa tayari kwa mshangao mwingine wa Afrika“, that is, “be prepared for another African surprise!”
Co-Founder – Africa Fintech Summit
Founder & CEO – Ibex Frontier