Fintech dominates investors’ choices as startup funding in Africa hits record levels

Fintech dominates investors’ choices as startup funding in Africa hits record levels

The steady increase of funding in the African startups is illustrated in the findings of two reports, which mark 2018 as a record year not only in terms of deals but also in terms of money received by the companies. At the same time, fintech in Africa emerges as the most attractive sector for investors, highlighting its significant growth potential, due to the unique economic and demographic characteristics of the region. Characteristics such as the unbanked and underserved population of the continent and the strong need for financial inclusion.

Conclusions are based on the findings of two surveys: Venture Investments Report 2018 from WeeTracker and the African Tech Startup Funding Report 2018 from Disrupt Africa. Despite their differences in methodology, both reports agree that Africa's startup scene has been on an upward trajectory for the past few years.

Specifically, the first report raises the value of last year’s 458 deals to $725.6 million. WeeTracker’s report includes companies that received investment for expansion or deployment in Africa, regardless of where they are headquartered. According to this report, the number of deals more than doubled and startups on the continent are receiving funding rounds of over $5 million.

Data from Venture Investments Report 2018 / WeeTracker

On the other hand, the African Tech Startups Funding Report estimates the total value of funding to $334.5 million (210 businesses in total). Numbers that are significantly smaller than those in the first report, but the one of Disrupt Africa includes only the companies that operate in the technology sector and are based in an African country. So the second survey could be considered to be a subset of the first one. According to the one of Disrupt Africa, total amount of money raised by African startups per year has grown by more than 50%, while the average amount secured by its company in 2018 reached a record $1.6 million.

 

Nigeria at the top

Another point to which both reports agree is that Nigeria climbed at the first place, being Africa's top startup funding hub. Nigeria overtook South Africa, while Kenya was at the third place. At the same time, new hubs are gradually emerging, attracting significant investments, such as Egypt, Uganda, Ghana and Tunisia.

Fintech continues to dominate

In terms of sectors, fintech space continued to dominate, remaining a clear favorite among investors. Both reports agree that fintech startups have received more money than any other sector in Africa.

Data from Venture Investments Report 2018 / WeeTracker

Fintech accounted for nearly 40% of total funding raised and -according to WeeTracker's report- for five of the top ten largest deals in the continent. On the other hand, Disrupt Africa’s report adds that the sector had a record year funding-wise and has grown by more than of 130% since 2017. We should not forget that during 2018 Channel VAS has made a strategic partnership in which Ethos, a leading South African investment company, has agreed to invest the amount of about $50 million USD in the firm.

It is clear that those record numbers are the result of Africa’s massive opportunity for certain financial services given its population and infrastructure gaps. Investors have begun to realize the size of this opportunity, funding companies that are in better position of addressing those gaps and expanding their business.

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