According to data compiled by Disrupt Africa, African tech startups received a total amount of funding in excess of US$185.7 million in 2015, and there is every reason to expect this will grow in 2016.
Only a few years ‘Africa’ was always the last place to come to mind when investors thought of where to best take their money for investment. Today, however, investors are thinking of the African continent as the next hub for start-ups.
African countries are now seeing a surge in their investment scene. But why the surge in interest? Among the sectors in Africa experiencing the largest degree of activity are the e-commerce and mobile industries.
Looking at the investors interested in Africa’s tech scene, both domestic and foreign investors are taking an interest in the continent’s steady eruption in technology. London-based NewGenAngelsAfrica’s eVa Fund (e-Ventures Africa Fund), as well as the East Africa Capital Fund, are an example of some of the angel networks that are involved in early-stage funding, ensuring that African start-ups have the necessary funds to sustain their growth.
In contrast to the past where many start-up ideas were ripped off, today support for these ideas can be seen through the investments funds made available to small companies.
Here are some reasons why African tech startup funding is on the rise and will continue to increase.
It’s high level of innovation
You cannot fail to see high levels of disruptive innovation when you visit the tech ecosystems of Lagos, Nairobi and Cape Town, or even further afield. From the likes of Rwanda’s SafeMotos, which marries vehicle telematics with an on-demand motorcycle taxi platform, to South Africa’s Custos Media Technologies, which is using the blockchain to tackle digital piracy, innovation is all around. And investors like innovation.
It’s Great social impact
Approximately 330 million adults, which is about 80 percent of Africa’s population, lack access to formal financial services. Also as many as 620 million people on the continent lack access to power. These two statistics alone demonstrate the potential impact technological solutions addressing these issues can have, and speak to the high level of interest from impact investors in fintech and solar startups especially.
There is sizeable return opportunity
Surely, funding businesses on the continent is not a charitable act, even though there may be a great deal of social good to be done by investing in African startups. Startups can make serious returns on investment if they can find effective ways of, say, providing millions of people with access to mobile insurance products, or rolling out pay-as-you-go solar products across whole regions.
You’re in good company
We know investors are like lemmings, investors have told us so. They like to see other people taking the plunge; they like strength in numbers. And with major international VC funds like Amadeus and EchoVC, as well as high-profile individuals such as Bill Gates, Steve Case, Tim Draper and even Mark Zuckerberg, investing in African tech startups, there is clear evidence that those that should know consider the space to be a worthwhile investment.
There is improvement in Skills
There have been concerns in the past about the level of entrepreneurial talent in Africa, as well as the technological skills of young African developers. But this is abating as success stories continue to roll out of the continent, while the likes of Andela and codeX are making great strides in training the next generation of coders, while even Google has got in on the act. Old fears that skills levels in Africa were just not high enough are declining.
The is a supportive ecosystem
Africa’s tech hubs have been much discussed, and sometimes their role has been overplayed, but there is no denying that the large number and high quality of these hubs have contributed to the development of the ecosystem and assisted a great number of startups. From Zambia’s BongoHive to Cameroon’s ActivSpaces, tech hubs are ensuring African startups develop as planned and are investment-ready.