African Startups raked in record $1.19bn VC funding in just 6 months of 2021

Flutterwave Raises $170M Series C to Expand to North Africa, Hits $1Bn Valuation

It’s a bountiful season for African startups. In just 6 months of 2021, startups on the continent have raised a whopping $1.19 billion in funding with deals worth $1 million and above accounting for about 95% ($1.14 bn) of it.

This number is more than double the amount raised during the same period last year, according to African data newsletter, The Big Deal.

Some of the notable funding rounds was closed by Kuda, Flutterwave, Termii, Havenhill, Kwik, Afriex, Bankly and Appzone. Fintech startup, Flutterwave led the way with a momentous $170 million Series C raise to become the third payments unicorn in Africa.

Start-ups in Africa have raised more in the first half of 2021 than they raised in the first half of 2019 and 2020 combined

How African Startups raked in record $1.19bn funding from VC in just 6 months of 2021

Fintech is still VC favorites in Africa

Of all the sectors, financial technology services remain favorites for venture capitalist investing in Africa. According to the report, nearly half (48%) of funding during the period went to fintech start-ups.

This is an improvement from the 38% that was contributed in H1 2020 during the pandemic and the 14% contributed during the record breaking 2019 season.

In terms of regions, startups based in the top four startup ecosystems are still preferred. 80% of that funding raised by startups during the period are headquartered in one of the big 4.

However, Nigeria and South Africa lead the pack, each accounting for 28% of the startups that raised funds.

The big 4 includes Nigeria, South Africa, Kenya and Rwanda

How African Startups raked in record $1.19bn funding from VC in just 6 months of 2021

US VCs closed more deals in Africa than African VCs

While the high influx of funding affirms the increasing viability of African startups, foreign VCs are still outpacing indigenous ones. Of the 369 investors that have been involved in at least one $100k+ deal in Africa this year, 110 (30%) are headquartered on the continent.

The United states has 133. This means that the US has more investors involved in a deal in Africa than African ones. For context, no local VC contributed to Flutterwave’s much-lauded $170 million Series C.

7 out of 10 investors involved in $100k+ deals in Africa in 2021 so far are based outside the continent

However, the report pointed out that Africa-based investors are significantly more active than US-based investors.

Based on this, its puzzling why African investors have less deals and an apparent gulf in funding when compared to foreign investors, especially as regards later-stage investments.

Dayo Koleowo, a Partner at Microtraction told Technext that most local VCs usually invest small amounts in early-stage startups while foreign VCs are typically more buoyant.

He however, added that local VCs will shift towards making bigger investments as more early-stage Nigerian startups succeed in the long run. 

“As the market grows and as we see more successful track records by small early-stage funds, we will begin to witness local small early-stage VC’s raise larger funds and be able to participate a little in later stages than they normally do, and of course do follow-on funding into the best-performing companies in their portfolio.”

All eyes on Africa – Why African startups are raising more money

The current boom in VC funding in Africa, isn’t just starting. It has been building gradually over the last five years. The prospect of the African market, among other things, have attracted VC into the continent.

In a chat with Technext, Lauren Cochran, Managing Director at Blue Haven Initiative, a VC that has invested in several African startups including Twiga Foods shared some tips on what VCs are looking for in Startups.

One of the most important thing is the team. According to Lauran, VCs have to determine how committed people are to their business and their idea.

The second is understanding the problem they are trying to solve. The Blue Haven MD explained that sometimes people see a problem that they don’t fully understand, or that they haven’t really evaluated and try to solve them which oftentimes doesn’t work.

Investor view start-up founding as teamwork, rather than a solitary genius

Another is the ability to attract other people who are excellent at what they do to work together on the problem that you’re trying to solve.

“Kind of like founder charisma and the ability to attract talent. I think that also kind of goes for investment as well. More people want to work with you and more people want to fund you. That’s a bit of a like secret sauce for some folks,” she said.

How African Startups raked in record $1.19bn funding from VC in just 6 months of 2021

Expanding on this, Lauren explained that they technical skill on a team is important because attracting tech talent really requires tech talent. She added that’s why startups that often have technical co-founders have an edge.

“we’ve seen businesses where someone has all the other qualities, like they seen the problem, they really understand the market, et cetera, but like they want to build an app and they don’t have a technical cofounder that’s tougher for us. Because like, attracting tech talent really requires tech talent.”

The report confirms this, roughly half of the deals in Africa are signed by a founding team duo.

Aside from the team, another thing VCs look at is the market. The Blue Haven MD revealed that VCs are often hoping to find billion dollar problems, but in the worst case, several hundred million dollars.

Finally, there is traction. Lauran says VCs often like to see some amount of product market fit. Therefore, most won’t invest in a pre-revenue startup.

However, she added that it doesn’t have to be perfect. “The startup can have one line of business and generating some revenue and they’ll have ideas about others that they might not have been able to build yet as part of the technology, or maybe they don’t have enough money.”

In summary,

With the obvious increase in funding, it appears that African startups are doing a lot of things right. They are particular winning VCs trust by fulfilling some of the key points listed above.

At the current track, 2021 is well on its way to breaking the 2019 record of funding in Africa.

For example the share of the fintech sector alone is already higher than that of previous years where most of the fintech funding was raised in H2 (89% of it in 2019, and 76% in 2020).


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