Funding for African start-ups slowed for the first time after nearly 10 years of growth as investors in the fledgling tech scene were put off by the Covid-19 pandemic, according to venture capital firm Partech Partners.
Companies on the continent raised US$1.43-billion (R21-billion) in 2020, down 29% from a year ago, Partech Partners said in a report. Just two deals above $50-million closed last year compared to 10 in 2019.
“There were hardly any mega-rounds in the African tech ecosystem,” the Paris-based firm wrote in its annual survey of start-ups that have most of their operations in, or get the bulk of their revenue from Africa. “This sharp drop clearly marks the impact of the pandemic and subsequent lockdowns.”
Africa is now showing an inverse trend to much of the rest of the world, including the US where start-up investing reached a record high of $130-billion in 2020, up 14% from the previous year, according to a Pricewaterhouse Coopers/CB Insights report. In Europe and Israel, overall funding increased albeit in fewer companies, according to data from Pitchbook.
Africa’s technology sector is still relatively small, though represents one of the highest-growth areas for venture capital investment — investment into the region increased 74% in 2019 and more than doubled in 2018. Companies that have done well include those that aim at filling gaps, such as payment platforms that make up for a lack of access to conventional banking and businesses that take advantage of increasing Internet access as more people get smartphones.
Total deals rise
Still, the region attracted some funding, despite investors’ reluctance to chip in on larger rounds. The total number of deals rose 44% in 2020 from a year ago, according to the report. Four African countries, including South Africa and Kenya, received 80% of the funds, while Nigeria got the bulk of the equity and Egypt signed the most deals.
Deals last year, where venture capitalists take returns, included WorldRemit’s $500-million acquisition of Sendwave, a money transfer service founded by Somalian Ismail Ahmed. Network International Holdings signed a $288-million agreement to buy DPO Group and Stripe took over Nigeria’s Paystack for $200-million. — Reported by Helene Fouquet and Loni Prinsloo, (c) 2021 Bloomberg LP