Africa Private Equity and Venture Capital Association (AVCA), a pan-African organization that encourages and monitors VC investments in Africa, released a report. The report shows that the Private Equity and Venture Capital funding in Africa have experienced some significant growth. The continent’s favourable economic outlook; market size, and a growing middle-class consumer base attests to this claim.
According to the report, Fintechs, information technology firms, and other companies in Nigeria, Kenya, and South Africa attracted a total of 613 Venture Capital (VC) deals valued at $3.9 billion, between 2014 and 2019. Specifically, South African companies attracted 21% of these VC deals, followed by Kenyan companies with 18% with Nigerian trailing at 14%.
The report was titled, Venture Capital in Africa: Mapping Africa’s Start-up Investment Landscape. The year 2019 was a record year in terms of VC deal value. The value of VC deals reported in Africa reached US$1.4bn in 2019; the highest on record. A total of 139 deals valued at $1.4 billion were recorded in the year 2019 alone.
The largest share of VC deals by volume from 2014 – 2019 was allotted to Fintech startups and information technology firms (19%), while Consumer Discretionary had (18%). Also, the largest share of VC deals by value was allotted to Consumer Discretionary (28%), Financials with (23%), and Industrials with (18%). The least share at 1% was allotted to Real Estate and materials.
However, a large portion of these VC deals during the 6-year period was recorded in South Africa, a country reported for having a “well-developed VC ecosystem”. In specific terms, South African companies attracted 21% of these VC deals, followed by Kenyan companies with 18% and Nigerian companies with 14%.
Interestingly, 21% of these VC deals were said to have gone to African-owned companies that are headquartered outside of Africa, although offering their services (mostly fintech solutions) to consumers on the continent.
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Analysis Of The Report
Analysis of the report also shows that one sector that has caught the eyes of investors is the utility sector. A lot of early-stage deals are common, with investors being attracted by companies providing alternative power solutions. These companies accounted for a significant number of VC investment rounds from 2014 to 2019.
These early-stage companies raised money to expand in Africa by strengthening their African presence. But, the majority of these companies are based in the United States, 53%.
More so, about one-third (32%) of the total number of early-stage investments reported in Africa were seed-stage deals. These deals accounted for only 5% of the total deal value. Series A and Series B transactions together accounted for 29% of the total volume, and 38% of the total value of early-stage deals. Also, 42% of the total number of investors that took part in VC deals in Africa between 2014 and 2019 were headquartered in North America.
The Chairman of the board, Africa Private Equity and Venture Capital Association (AVCA), ‘Tokunboh Ishmael, said: “Africa’s VC industry continues to grow from strength to strength. However, we expect 2020 to be another strong year despite global macroeconomic headwinds. The continent’s VC ecosystem showcases the best of African innovation and entrepreneurship, which has the potential to be a key source of solutions to Africa’s intractable problems and a gamechanger for the continent’s development trajectory. AVCA remains committed to supporting the VC industry by charting its growth and providing authoritative research on the asset’s fundraising, deal, and exit activities”.
According to the report, most of the investors that took part in VC deals were US-based which made up 40%. South Africa (9%) led the pack on the continent, while Nigeria (4%) and Egypt (2%) followed. These three countries are the most prominent VC hubs in Africa. This growth also relies on the fact that Africa is home to the world’s largest free trade area.
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