Africa’s start-ups investment ecosystem

Posted on September 25, 2017 12:05 am

A recent study shows growing investor confidence in Africa’s startup market, with investment in the sector having grown 30 fold over the past three years to $8 billion in 2017. The report which focused on venture capital outlook 2017, carried out between January and July this year, suggests that the startup landscape in Africa is still in its infancy, but growing rapidly, primarily driven by e-commerce and transportation.Investment in the sector so far for 2017 has already more than doubled compared with $5 billion in the same period last year. “We can see the momentum with investment levels already double from where they were in all of 2015. The findings in this report are eye-opening and we hope it will help drive further investment in the startup ecosystem here,” one of the researchers told your blogger.There is a strong believe in the potential of Africa’s digital economy and the outlook report clearly shows that many local and foreign investors share that enthusiasm.In the coaching program, according to report, the governments across the continent are holding a series of scouting events looking for potential startups and finding candidates to be groomed.The coaching is essential in optimizing the potential of young Africans and to create high-quality, diverse tech startups.Tech startups in Africa have been growing quietly in the community of founders and in campuses during the past three years with little involvement from the governments until some of them recently made the digital economy their priority in their national economic development, as they aim to become a player, and not only in the African market.Africa already has the biggest potential market in the region for e-commerce startups and tech companies providing digital solutions.In e-commerce transactions alone, Africa booked $25 billion at the end of 2016, a jump from the $12 billion in 2015, according to data from the report. The report predicts the transaction value will reach $40 billion in 2019 as venture capital firms set their eyes on African e-commerce startups.

To protect the ecosystem, some African countries like South Africa, Nigeria and Ghana are introducing a new set of regulations on taxation and funding in their roadmap. Most countries however have opened the doors to foreign investment in the e-commerce and digital sectors.The report, expected to become a regular publication, suggests that venture capital remains extremely bullish on Africa’s economy, and sees investment opportunities, given the region’s steady growth, emerging middle class and massive population of digitally savvy young people.Financial technology and health care emerged as the top categories for future investment.Researchers admit they were blown away by how enthusiastic the investors were and how incredibly bullish they are in African countries like South Africa and Nigeria.  The reports says potential for growth is incredible, but so is the need for engineers.This is not about incremental change. There needs to be a massive push to create more talent if these startups are going to be able to scale and meet demand, report notes.Investments players interviewed for the report highlighted key focus areas to speed up growth of the startup ecosystem in Africa. Among them includes startups facilitation, talent development, fiscal incentives, funding and exit options. Report authors says African countries can play a strong role, as evident from mature markets.Future investment in startups is highly dependent on investor confidence in the market, so it is crucial to understand how investors view the African market, in both the near and long term, it adds.The report says Africa investment values continued to soar over the past three years, though deal flow has stabilized and shifted to later stages as venture capital funds focus more on profitability than top line growth.By taking a deep look into the African startup investment environment, this research provides a window into the investor mindset and suggests how business leaders and policy makers can implement improvements that will ultimately strengthen venture capital confidence and attract both local and foreign investment for many years to come across Africa.

Contador Harrison