Nigeria tops venture capital funding for Africa’s startups

“Nigeria’s huge population, about 200 million people, and the number of banks, businesses and stores selling services or products to them have been a boost to technology companies. Despite lackluster economic growth, Nigerian banks are investing in technology to make them competitive while Fintechs are at the same time launching products that are eating into the business of the banks”.

Nigeria and Kenya were the most preferred African destinations for venture capital (VC) investments in 2020, attracting $307 million and $305 million respectively.

This was revealed in a new report by AfricArena, using Partech data. The report forecasts that venture capital funding for African startups will rise to between $2.25 billion and $2.8 billion in 2021.

Egypt came in third, attracting $269 million in venture capital funding in 2020 while South Africa attracted $259 million.

Venture capital flow into Rwanda, which has positioned itself as a hub for East Africa, plunged drastically from $126 million raised in 2019 to just $11.6 million last year in 2020. The 91% decline was attributed to the new coronavirus pandemic.

Also Read: Paystack, Interswitch, Flutterwave… Nigeria’s Fintech Revolution

Africa’s VC investments reached an all-time high in 2019 when 234 tech companies raised $2.02 billion in 250 equity rounds, a 74 percent increase on the $1,163 recorded in 2018. There was a 29% decline in VC inflows in 2020 but the authors of the report forecast that 2021 will start an upward trend that will see VC funding “exceed $10 billion by 2025.”

The optimistic outlook for venture capital investment in Africa is explained by factors such as an increased allocation of capital from corporates to VC activities, acquisitions of African tech companies, and major initiatives from Europe such as the Enrich in Africa programme.

The Enrich in Africa programme is an European Union initiative aims to promote innovation by fostering partnerships between European and African start-ups.  It provides business support services such as “access to the local business networks, meeting potential investors, tailored trainings, and support in obtaining Visas.”

Nigeria’s huge population, about 200 million people, and the number of banks, businesses and stores selling services or products to them have been a boost to technology companies. Despite lackluster economic growth, Nigerian banks are investing in technology to make them competitive while Fintechs are at the same time launching products that are eating into the business of the banks.

One of the biggest deals in Nigeria’s tech scene is the $200 million acquisition of PayStack by the American company Stripe. VC companies will be looking to back African startups that could be the next PayStack.

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