Investing in African tech startups can seem like a risky venture. Funding can elevate ideas and fledgling companies into disruptive businesses that are growing globally. Boston Consulting Group (BCG) explores this in a report on the expansion and maturation of African tech startups. Companies can produce novel products and increase their earning power. Hence, securing funding for an African tech start-up is a critical milestone. With over one billion people on the continent and the absence of internet full coverage and electricity, Africa is a land of great potential and possibilities. It affords phenomenal opportunities for growth, especially in tech. Global tech giants like Microsoft and Google just like many other investors have too. The reasons are not far-fetched.
The growth pace of the market
According to Endeavor Nigeria, Africa’s digital economy is increasing with estimated market size of $115 billion and is anticipated to reach $712 billion by 2050. That is about 83% growth within the next 28 years. Africa is experiencing increased internet penetration and an increased equity round closing rate. So, Africa is recognized as one of the fastest-growing tech ecosystems. Africa’s tech ecosystem produced five unicorns in 2021- Flutterwave, Andela, Wave, Opau, and Chipper cash.
In 2021, the African ecosystem experienced an increase in funding opportunities. This is made from the glaring increase in size of the rounds from venture capital. There has also been a rise in angel investors in the ecosystem. Several angels have piqued interest in Africa after the Paystack acquisition by stripe.
Despite the setback from the pandemic, the bounce back has been tremendous. This show that the tech startups in Africa are not going anywhere anytime soon with investments.
The quality of innovation
Africans have recognized technology as a problem-solving tool. They have continued to leverage the sustainability of a tech driven solution to its fullest hence the growing industry. The overwhelming problem of unemployment in Africa has experienced a reduction. The rise of tech startups has led to the provision of jobs. With the increase in penetration of mobile phones and the internet (Kenya- 82.5 percent, Nigeria- 73.0 percent, South Africa- 57.5 percent, Egypt- 52.5 percent), Africa is experiencing rapid adoption of the digital world.
The increase in demand for tech talents has been tremendous. Tech hubs have risen and become a breeding ground for tech talent. Many homegrown talents are seeking innovative ways to solve Africa’s problems. These hubs ensure African talents develop as planned and are investment ready. Great tech companies have risen as a result. Examples are Bamboo helping Africans grow their money, Flutterwave making payments easier, Shap shap solving the problem of last-mile delivery, and many more. Statistics have shown that jobs are continuously lost due to innovations in technology – Automation. We can’t deny that they have given rise to new professions.
Other investors are doing so
Major investments in Africa’s tech ecosystem ($100,000 or more) have come from outside Africa. Only 20% of venture investments in African startups are from Africa-based investors. High-profile individuals like Mark Zuckerberg, Bill Gates, Steve Case, and Tim Draper are investing in African tech start-ups. Well versed individuals in the global tech industry deem African startups worthwhile. Bleak as this looks, it poses an opportunity for tech investors. Africa has the opportunity to grow as opposed to developed continents. Global tech Investors, like Google and Microsoft, have recognized this, and so continue to invest in African tech. So, this should at least make you consider the space for your investments.