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African startups join global funding boom as fintech shines

But where else is capital flowing? And to whom?

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The Exchange is on a trip around the world, poking our heads into various startup markets to better understand how different geographies are faring during a historic boom in venture capital activity. Globally, the venture capital world is afire, pushing record sums into upstart technology companies. But the capital is not flowing evenly.

For example, the explosion in capital raised by U.S. startups this year is contrasted by a modestly cooling Chinese venture capital scene. But apart from China, most key startup countries and regions are seeing strong investor interest. The continent of Africa is no exception.


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Early data indicates that Africa is set to trounce historical records in terms of venture capital raised in the year and that the first half of 2021 saw roughly twice the funds raised by African startups as was recorded in the first half of 2020. Startups across Africa have never had more access to capital than they do right now.

But big numbers can be distorting. A few outsized rounds can make an overall investment picture appear rosier than it may actually be for startups on the ground. To fully understand a startup market’s capital access, we’ll want to better understand the stages where capital is flowing quickly and the points of startup life where it’s more of a trickle.

To that end, The Exchange collated a number of data sources concerning Africa’s Q2 2021 and H1 2021 venture capital performance and collected notes on the results from Dario Giuliani of Briter Bridges, a business data provider focused on Africa, and Julio Dibwe Mupemba of Toumaï Capital to expand our understanding of the continent.

Let’s figure out which startup stages have the easiest and hardest capital access, whether Africa remains underfunded, understand changing diversity in founder funding, and just what’s up with impressive fintech venture totals in recent quarters.

A 2021 comeback

After a somewhat difficult 2020, venture capital flowing into African startups is back on the rise, with reports indicating that investments raised in the first half of 2021 totaled more than $1 billion, albeit with small variations — data discrepancies are a recurring issue when it comes to VC data. There are structural reasons for slightly divergent numbers that have not completely disappeared, but our different sources still concur on the general trend and ballpark results.

For instance, the Africa-focused Substack newsletter The Big Deal reported a $1.14 billion H1 2021 total for deals above $1 million and $1.19 billion when including deals in the $100,000 to $1 million range. Those numbers coincide with Briter Bridges’ own count of $1.2 billion in disclosed funding between January and June 2021, and with a $1.03 billion estimate from the Global Private Capital Association (GPCA). These figures are also in line with 2021 predictions from tech accelerator AfricArena, which in a report earlier this year estimated that “investment into [African] tech startups will be between $2.25 and $2.8 billion, making it the best year in the history of tech investment on the continent.”

Venture capital investment in Africa predicted to reach a record high this year

Putting this data into perspective, Toumaï’s Mupemba noted that African startups “are still underfunded,” with the continent’s 54 countries raising less in aggregate than France alone. “Back Market has fundraised more than Nigeria and Ghana combined,” he added. (Back Market raised a $335 million round most recently.)

Still, the growth in funding deployed is undeniable. According to The Big Deal, venture capital that went into African startups in the first semester “is more than double the amount raised in H1 2020.” As we mentioned, 2020 wasn’t a great year for venture capital in Africa, but the 2021 result thus far greatly outstrips the $512 million pre-pandemic figure that GPCA reported for H1 2019.

As we have seen in other markets, money tends to attract more money, which means that some of the recent large rounds could attract more VC funding. Earlier this week, TechCrunch’s Tage Kene-Okafor insisted on two important factors that have contributed to investors’ FOMO when it comes to African deals: “Paystack’s exit to Stripe and Flutterwave’s unicorn status.” Other beneficiaries of major rounds in the first six months of the year included Zipline, with $250 million; TymeBank, with $109 million; Chipper Cash, with $100 million; and Gro Intelligence, with $85 million. This is also unlikely to stop in the back half of the year: South African payments startup Yoco announced an $83 million Series C today.

South African payments startup Yoco raises $83M Series C backed by Dragoneer

Where there’s money (and where there’s not)

Big numbers aside, which African startup stages are seeing abundant capital, and which are seeing too little? According to Mupemba, Africa “definitely needs more funds targeting pre-seed and seed companies.” Why? In the investor’s words, while “more seed deals” are happening, the bulk of “funds continue to go to pre-Series A and Series A ventures, which means more mature companies.”

In Mupemba’s view, the most active African stages regarding venture investment are pre-Series A and A rounds.

Briter Bridges’ Giuliani sees things slightly differently. In his perspective, “an increasing focus on seed and Series A” in Africa is leading to growing round sizes. But Giuliani also noted that he’s seeing a lot of “super early-stage” activity “as angel investments become more accepted, the perception of risk smoothened, and new support programs dedicated to Africa-focused startups are launched in and out of the continent.”

What’s powering the very early-stage activity that Giuliani noted? He said that he’s “personally excited about growth in local early-stage capital availability, mainly driven by successful founders ‘giving back’ by setting up funds and syndicates,” along with individuals moving back to Africa.

Parsing the two perspectives, it could be easily said that while there may be more capital available for the very earliest-stage African startups, it’s not enough to meet founder demand or need.

Regarding the later stages of venture capital, Giuliani noted that African “growth-stage capital still comes predominantly from overseas investors and corporates.” That’s a general good — external capital as a booster to Africa’s maturing internally sourced venture capital scene — but not a panacea.

For Africa’s startup ecosystem to really hit its stride, more early-stage capital will be needed. We can’t help but wonder about the complaints we’ve heard from very early-stage investors in markets like the United States concerning price and competition. Why don’t they look a bit farther afield to a market where there’s more founder ambition than pooled capital?

Continuing our theme of where money is and is not flowing in the African venture capital scene, let’s talk about sectors. Per The Big Deal, 48% of capital in the first half of 2021 went to fintech startups. Fintech has done well in Africa historically, but to see the single sector command half of the total startup investment in the continent caught our attention.

Briter Bridges data notes that three out of four $100 million rounds that were raised in Africa’s H1 2021 went to fintech companies. (The rounds in question: above-mentioned Chipper Cash, TymeBank and Flutterwave.) That’s a full 75% of mega-rounds landing in a single sector, a perhaps surprising amount of concentration.

Why is fintech able to attract so much capital in Africa? Giuliani told The Exchange that it’s hard to “pin down a ’scientific’ answer to the success of fintech” on the continent, but that the strong fundraising figures posted by financial technology startups in Africa “seem to reflect global trends.” It’s a reasonable point. Fintech is a hot sector globally, with huge fundraising events landing in the United States, Europe and Latin America this year. It is perhaps even hotter in emerging markets, where incumbents have less foothold and consumers could skip ahead into next-gen solutions.

But there’s more than fintech funding occurring in Africa. Giuliani cited e-commerce, clean tech and supply-chain-focused sectors as “seeing comparable interest” to fintech. Perhaps we’ll see those three areas of founder focus and capital command a larger portion of aggregate venture capital in Africa’s future.

Something that The Exchange wants to keep tabs on is what portion of international venture capital flowing into Africa lands in fintech rather than other sectors, in addition to the same data for domestic African venture capital funds. If there’s a divergence, we may be able to see pattern matching from international funds looking to put more capital into fintech startups, while Africa-based funds are more willing to invest broadly.

Smart money

If there’s a gap that Africa-based funds are well-placed to fill, it might be pre-seed capital — and more precisely, smart money. Sure, African startups have become a fixture of Y Combinator’s latest batches, but it is not enough, entrepreneur-turned-investor Olumide Soyombo told TechCrunch. One of Africa’s most active angel investors, he is now launching a fully fledged fund called Voltron Capital to scale his approach.

One of Nigeria’s high-profile angel investors is launching a fund for African startups

In a similar vein, the co-founder and COO of Nigerian fintech startup PiggyVest, Odunayo Eweniyi, teamed up with Endeavor Nigeria’s managing director, Eloho Omame, to launch FirstCheck Africa, a female-focused angel fund. This is part of a larger trend of new funds and angel networks targeted at African female founders, which also include Alitheia IDF, Dazzle Angels, Enygma Ventures and Rising Tide Africa.

According to Giuliani, the emergence of funds dedicated to female entrepreneurs is one of the factors that contributed to the fact that there were more female CEOs raising capital in 2021 than in previous years. As The Big Deal wrote about H1 2021 numbers, “14% of the funding was raised by female CEOs; this is far from gender-balanced, yet a significant improvement compared to H1’20 (2%).” The share of funding going to all-male founding teams was also down — 77%, compared to 88% in 2020.

There is still a very wide gap, but Giuliani sees other factors that will likely contribute to more African women raising funding in the future: less stigma around entrepreneurship, lowered barriers to entry, expanded access to capital, and more women with tech and finance educations.

Among recent examples, Giuliani mentioned Ghana’s Jetstream, whose co-founder and CEO Miishe Addy talked to TechCrunch last month: “I especially hope that our business growth encourages the investor side of the tech ecosystem to take a second look at all of the women leaders who aren’t being adequately funded,” she said.

The African startup scene is rapidly evolving, and the above is only a snapshot of where it stands today. We expect rapid change in terms of capital allocation by sector and stage as opportunities open and certain areas become crowded. Perhaps fintech will prove to be one of those more congested markets in time. But what is clear today is that more investors are interested in deploying capital into African startups than ever, and there is reason to believe that those dollars are finding an increasingly diverse set of hands.

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