Updated: Jun 23, 2019
While it may be easy to assume that the majority of tech startups are based in Silicon Valley or Shenzen, the African tech startup space is growing at a blistering pace. Startups across the continent raised over $1bn in deal funding in 2018, a 100%+ increase on the previous year. That's a whole new record and a trend that seems set to continue, if H1 2019 funding figures are anything to go by.
Technological Advancements = Growth Opportunities
In just the past few years, it’s gotten more cost effective across Africa to develop software and to work with technology in general. That’s partly due to increased access to locally trained tech talent, thanks to companies like Andela. The tech market is getting bigger too. Smartphone penetration (33%) and internet adoption (35%) continue to register the fastest growth rates in the world. With this in mind, it’s less surprising that startup founders are rising to the challenge and deploying technology solutions to solve problems faced on the continent.
Overseas VC investors have taken note of this and are flocking to Africa in increasing numbers. In 2018, the lion share of VC funding in African startups originated from outside the continent. Silicon Valley accelerators, such as Y-Combinator and 500 Startups have also started recruiting from Africa. YC accepted 7 African startups in its Winter Batch 2019 class.
Digital Innovation in Africa
The GSMA - which represents the global mobile industry - says that the number of technology hubs in Africa has doubled since 2016, and the growth of these organisations shows no signs of slowing down.
They advise that there are over 440 ‘tech hubs’ working in Africa right now, largely in coastal countries. 55 of them are based in Nigeria, 59 in South Africa, and 30 are in Kenya, for example.
Sectors opening up across Africa include those as diverse as fintech, e-commerce, logistics, agtech, healthcare, and even those based in cryptocurrency. Big fish such as Facebook, Microsoft and Google, have invested heavily in Africa’s startup ecosystem. There is a fresh focus on helping local people to understand how to build and use fantastic new technology at their fingertips.
African Tech Startup Space and Venture Capital
Africa's first Unicorn, Jumia, listed on the New York Stock Exchange in April 2019, raising $216m. This event has been widely seen as a success for African tech, and certainly not the last unicorn from the continent you will hear about.
Elsewhere (January 2019), Andela announced a $100m Series D round, led by Al Gore's Generation Investment Management, Kenyan-based Cellulant, a startup that provides payments infrastructure to banks raised a $47 million Series C round in 2018, and Nigerian payments company Paga, launched by Tayo Oviosu in 2010, raised a $10 million Series B in September 2018.
Some investors remain reserved, however, as while funding may be on the up and up, it will remain to be seen how many startups continue to get funded.
Investing in a startup at all is a risk, regardless of where it may be based. However, tech culture, too, seems to be booming across the continent. From cryptocurrency to media streaming, film studios to money lenders, there’s no shortage of big ideas being born.
What Does the Future Hold?
Based on statistics from the past few years, now is a fantastic time to invest in Africa’s tech mania. The African tech startup space is showing few signs of being a bubble thanks to the sheer number of problems that startup founders are building solutions for. What’s more, the availability of new tech is only going to increase. That, if nothing else, should help startups expand even further. If blue-chip companies and investors are taking steps here, there's every reason you should, too.