Following a dynamic week in the financial sector, we’re shifting our focus to a more measured pace: venture capital activity in Africa throughout 2020.

The Exchange has consistently analyzed quarterly and annual statistics for venture capital markets in North America, Europe, and Asia, as well as data pertaining to specific startup sectors. Starting now, we will also regularly examine developments within the African venture capital landscape.

Please accept our apologies for the delay in yesterday’s edition of The Exchange. Unforeseen global events required our immediate attention to breaking news. We are now resuming our regular schedule. 

To analyze African venture capital performance, we are referencing a report detailing 2020 data from Briter Bridges, a research organization specializing in the continent’s private capital markets. The Exchange also spoke with Dario Giuliani, the report’s author and a director at Briter, to discuss the findings.

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The data reveals a venture capital environment that is generally expanding, although 2020 presented a varied outcome when contrasted with 2019. When accounting for a few exceptionally large investments, the overall picture becomes considerably more consistent.

We will now review the key statistics, gain insights from Giuliani regarding the areas experiencing the fastest capital growth, and conclude with an overview of the startup categories currently attracting the most investment in Africa.

Africa’s 2020 Venture Capital Performance

Throughout my experience at Crunchbase News, I was part of a team dedicated to comprehensive reporting on venture capital markets globally and domestically. This involved careful judgment in determining what qualified as a venture capital event, and how to accurately represent rounds where details weren’t publicly available.

I’ve also developed familiarity with venture data provided by PitchBook and CB Insights, and I’m now incorporating data from Briter as a reliable source.

My conversation with Giuliani revealed that his team undertakes the crucial task of meticulously gathering and organizing information. I share this to emphasize that we now have a consistent source of dependable data – compiled with input from seventy different investment firms – focused on Africa, which we will utilize regularly to monitor the continent’s progress. This represents a significant benefit.

What insights does the data reveal? We need to consider that Briter historically categorized both large investment rounds – defined as $90 million or more – and mergers & acquisitions (M&A) together. Therefore, focusing solely on the total value of African deals under $90 million yields the following results:

• 2016: $331 million ($759 million including megadeals and M&A).
• 2017: $438 million ($638 million including megadeals and M&A).
• 2018: $669 million ($980 million including megadeals and M&A).
• 2019: $1.12 billion ($2.58 billion including megadeals and M&A).

The data for 2020 was segmented differently. Briter indicated that no megaround investments occurred in Africa during that year, and has therefore provided figures for rounds below the mega-round threshold, acquisition values, and the total value of rounds that were not publicly announced.

Here’s a breakdown of those figures:

• Total value of publicly disclosed African rounds in 2020: $1.07 billion.
• Total value of African startup M&A activity in 2020: $1.12 billion.
• Total value of “undisclosed funding” in Africa during 2020: $243 million.

A comparison of overall 2020 figures with those from 2019 suggests that the previous year was a strong one for African startups, despite a decrease in the number of very large funding rounds.

Looking at the data on a monthly basis, African startups secured the majority of their 2020 funding during the latter half of the year, although November and December saw comparatively lower results. For Africa, as with much of the world, the third quarter of 2020 was a period of significant venture capital activity.

What factors are contributing to the generally positive venture capital trends in Africa recently? Giuliani explained to TechCrunch in a subsequent communication that “investment in Africa is being fueled by a growing support network for early-stage companies, including accelerators, seed funds, syndicates, and angel investors,” and by “market consolidation,” which is supporting both “later-stage deals and a growing M&A market.”

Importantly, these factors don’t appear likely to change, suggesting that the growth in investment activity experienced by African startups in recent years could continue into 2021 and beyond.

Which startups attracted the most investment? The report indicates that fintech companies were in the lead, receiving 31% of all invested capital – and accounting for over 90% of M&A activity during the year – followed by clean tech (22%), health tech (9%), agtech (7%), data and analytics startups (7%), and e-commerce (5%).

In which African countries was capital most often invested? According to Giuliani, the “countries forming the ‘Innovation Diamond’ – Kenya, South Africa, Nigeria, and Egypt – continue to be the primary recipients of funding and possess the most developed ecosystems.” However, he also noted a “new wave of countries” experiencing increasing venture capital investment, including “Morocco, Tunisia, Ghana, Uganda [and] Tanzania.”

This is genuinely encouraging. Beyond the Jumia IPO and Stripe’s acquisition of Nigeria’s Paystack for several hundred million dollars last year, I haven’t dedicated enough time to studying the continent’s startup landscape. Discovering that so many countries have active startup communities is truly exciting.

However, not all trends in Africa are positive. The report suggests that similar challenges regarding gender diversity exist within the African startup ecosystem as in other regions.

Briter’s data shows that only 15% of founders, co-founders, or C-level executives at funded startups in 2020 were women. Therefore, further progress is needed to achieve greater gender balance among African startups, a situation that is broadly consistent across the globe.