the venture capital boom on the African continent

In 2021 alone, venture capital investment reached $ 5.2 billion, benefiting 604 unique companies in Africa, the African Private and Venture Capital Association (AVCA) said in its latest report. This is a level that has never been reached, almost 5 times more than in 2020, and much more than the $ 5 billion invested in total between 2014 and 2020, ie over seven years. “This increase compared to the previous year is particularly impressive, given the decline in funding that was observed in 2020, which led to a slight tightening of investors’ wallets after the Covid-19 pandemic.”experts comment.

The technology captures 81% of the investment

These figures once again testify to the attractiveness of the continent for venture capitalists. And when the latter are betting on African companies, they are primarily interested in the technology sector. Thus, technology or technology-oriented companies operating in various sectors (Fintech, e-commerce, HealthTech, HRTech, MobilityTech, InsurTech, Supply Chain Tech …) absorbed 81% of the 5.2 billion invested last year. Other sectors that have benefited from investment include the discretion of industry and consumers.

On average, the venture fund invests $ 8 million in an African company. AVCA recorded 16 transactions worth more than $ 100 million each, made by fifteen companies.

After the United States and Europe came the time of Africa?

By definition, venture capital or venture capital is a capital investment activity that involves obtaining a minority and temporary share in the capital of young innovative companies with high growth potential in order to increase their equity. Emerging in the 1940s, the practice was widespread in the United States, where venture capital exceeded $ 130 billion in 2019 against $ 60 billion in 2015 and affected several thousand companies, according to a joint report by data provider PitchBook and National Venture Capital. American Association (NVCA).

In Europe, venture capital continues to grow with investments of more than $ 100 billion in 2021, according to Statista, led by the United Kingdom ($ 34.9 billion), Germany ($ 17.2 billion) and France ($ 11.4 billion).

In Africa, venture capital made its first steps around the 2000s. South Africa, which has long been a leader, is now overtaken by Nigeria, which is becoming the leading African market with 145 companies that raised $ 1.1 billion in 2021. Thus, the country of Muhammad Bukhari puts West Africa at the top of the industry. Next are Egypt (98 deals for $ 484 million), Kenya (87 deals for $ 225 million) and Ghana (23 deals for $ 78 million), which closes the top five.

The economic dynamism on the continent since the 2010s, along with the digital and entrepreneurial revolution born of mobile money, has boosted investment fund interest in African nuggets. Although English-speaking Africa continues to be central, French-speaking Africa has grown significantly in recent years. This applies to Morocco (6th African venture capital market in 2021 according to AVCA), Senegal (7th place) and Côte d’Ivoire (9th). Rwanda is in tenth place.

The volumes, of course, are still far from those observed in the United States and Europe. But AVCA experts believe that the African venture capital industry “Is on the verge of huge growth.” It would be easy to give them an advantage in doubt, because now there is a boom, several experts have seen that it will come. “Africa’s venture capital industry, needed for the growth of future African foals, is still in its infancy, but it promises rapid development in the coming years.”said Kenza Lalu, founder and managing partner of Outlierz Ventures, a venture fund dedicated to African startups based in Morocco, in an analysis published on LTA in November 2017. It was based on the development observed since 2012.

new actors

If the growth of venture capital on the continent is stimulated by increased investment of traditional players, experts also note the arrival of new players, including venture fund managers from the Asia-Pacific region. For example, Singapore funds first acquired stakes in 22 unique African startups in 2022.

U.S. investors, who participated in 357 venture capital transactions in Africa in 2021 compared to 268 deals from 2014 to 2020, were particularly notable for movements such as billionaire Jeff Bezos through Bezos Expeditions or Twitter co-founder Jack Dorsey through his electronic payments company Block . According to the report, these were large transactions in value.

Other investors are from Canada, the United Kingdom, the Netherlands, Germany, China, the United Arab Emirates or Saudi Arabia. Last year, France participated in 28 unique companies compared to 17 companies in the previous seven years. In particular, we know that the French Development Agency (AFD) has invested between $ 3 million and $ 7 million in venture capital funds to support African startups, including through its subsidiary Proparco.

The business angel African investment funds, which have significant presence in the venture capital industry, are listed in South Africa (74 deals in 2021 against 58 in the previous seven years), Nigeria (63 deals against 22), Egypt (33 deals against 12) and Kenya (16 agreements against 11).

Pressure to run in other sectors?

For experts, all this data is a sign that venture capital still has a bright future in Africa. In addition, the AVCA Global Activity Report for 2021 contains an exercise “sole” for private investment in total, with inflows reaching a record high of $ 7.4 billion through venture capital transactions. Although financing has always been one of the biggest Achilles’ heels in the development of very small and medium-sized enterprises on the continent – but dominating the economic structure – venture capital could thus be a solution to excellence for young people. The African shooting, but the need for companies that do not have technical technology as their core business, to further whet the appetite of investors, may become urgent.