African start-ups are reclaiming their place in the global innovation landscape

African start-ups are reclaiming their place in the global innovation landscape

African start ups are reclaiming their place in the global innovation

The run-run started in December 2021. Several analysts indicated that investment numbers in African emerging companies would surprise and speculation spread. At the beginning of the year, various balance sheet reports were published, which supported the suspicion with data. According to figures from PartechPartners, which conducts one of the most prestigious studies, in 2021 investments in African start-ups or start-ups have roughly quadrupled compared to the previous year, namely multiplied by 3.7 and reached a value of 5,243 million dollars, 4,900 million euros, which means that it has practically increased tenfold in four years. And the pace in 2022 is even faster. The Africa: The Big Deal Observatory verified that emerging African companies had already reached $1 billion in investment in the first seven weeks of the year, nearly a quarter of all of 2021.

This type of funding has increased globally, but the rate at which it has done so in Africa goes beyond this general dynamic. According to Crunchbase data, “Global venture investment totaled $643 billion last year compared to $335 billion in 2020, a 92% growth.” However, the growth rate in Africa is significantly higher. Different advisors offer slightly different numbers because they don’t use the same methodology, but there is agreement on the start of 2021. If Partech points out that the investment for 2020 has multiplied by 3.7; Briter Bridges puts that number at 3.5; The Disrupt Africa report shows that it has tripled and that of Africa: The Big Deal that it has multiplied by 2.5.

Beyond the Differences Iyinoluwa Aboyeji, head of the Future Africa Fund, one of the funds that invests most intensively on the African continent, explains that in 2021 external and internal factors have coincided that explain the increase. “In 2021 there was a lot of turmoil surrounding technology investment in China, so many global investment firms probably thought it was a good time to transfer some of their money to Africa. It was also one of the few areas that was not completely closed due to Covid-19,” he points out. But for Aboyeji, it wasn’t all coincidence. “The most important thing,” he affirms, “is that the continent was prepared. It’s been a revolution that’s been simmering for the last decade because there’s a lot of people investing in ecosystems since 2010.”

This veteran investor was the origin of two of the most prestigious startups on the continent: Flutterwave – which offers payment solutions and other financial products for commercial transactions – and Andela – a platform that connects companies that need technological solutions and talent in emerging markets–. They are two of the first African unicorns (companies to reach a billion dollar valuation). Aboyeji represents a new generation of investors in African ecosystems: the entrepreneurs who have made their businesses successful and are now funding other promising initiatives.

In fact, one of the novelties observed in the Africa report: The Big Deal of 2021 has to do with the origin of investors. Most donors come from North America, that hasn’t changed, the difference is hardly noticeable. 290 investors from North America have registered, compared to 222 from Africa and 176 from Europe. In addition, the most active investors are Africans, specifically 100 of them have been involved in more than one operation compared to 69 of North Americans.

Iyinoluwa Aboyeji argues that African investors were the ones who really “initiated the current development”. “At the height of Covid-19, when all stock platforms were shutting down, these people decided to support African companies. This decision completely changed people’s lives,” he says, recalling that African investors were the first to “believe in ecosystems and support them for others to follow later.”

Another novelty is the diversification of the industries in which the financed start-ups operate. Admittedly, the fintech space has emerged as the most attractive, accounting for between 53% and 62% of investment in emerging companies on the continent. But it is also a fact that the list of industries is getting longer and areas such as e-commerce and retail or logistics are making a strong impression. And also others such as education or health technologies, agriculture or the so-called clean technologies and the transport sector.

Startups create economic development by empowering people to build businesses, engage communities and improve their lives

“Startups ensure economic development,” says Iyinoluwa Aboyeji, “by giving people the opportunity to build businesses, engage people and improve their lives, whether it’s improving payment methods for retailers, creating jobs for the young people or improving the means of communication or offering funding platforms that enable companies to enter the global market. All of this contributes to the economic development of the continent.” The head of the Future Africa Fund is aware of the role of these corporate initiatives: “They are beginning to transform people’s lives, increase their income and help them live better . The focus, of course, is how we help people move forward through the use of technology.”

Similarly, Samir Abdelkrim, a researcher specializing in African ecosystems of technological innovation, recalls previous experiences in this area, such as B. the occurrence of mobile money in Kenya: “The poorest Kenyans, the base of the pyramid, generated an exchange currency with their mobile phones. This is called organic innovation. They were the people who couldn’t access the banking system, they were the ones who were locked out of the system, and they hacked the technology to get around that lockout. The poorest population had created an alternative over their phone, their own bank.” And remember that in this whole process, “the essence is the use of technology”. “It is not the technology that produces inclusive and social development,” warns Abdelkrim, “it is the use of that technology. The same mobile phone used to play games or watch Netflix in the US or Europe was used to send money or receive agricultural information. Only use turns a digital tool into a social tool.”

The latest development is the expansion of the geographic reach of this sector. On the one hand, the so-called “Big Four”, the four largest markets on the continent, are consolidating and Nigeria is consolidating its leading position with almost a third of all investments, followed by South Africa, Egypt and Kenya. Africa: The Big Deal data shows that these four countries monopolize 81% of the funding.

Samir Abdelkrim takes a look at these markets: “Historically, Kenya is one of the most innovative ecosystems. It all started in Nairobi, so Kenya is important to the strength and dynamism of its community. South Africa has the best infrastructure. In Nigeria we find the big numbers, the demographics, the huge population of Lagos… Egypt offers an interesting combination of big numbers, a crossroads between Africa, the Mediterranean and the Middle East, great talent, good infrastructure and launch opportunities.”

But this expert widens the view: “And then we find French-speaking Africa with Senegal, Ivory Coast, Mali, Morocco, Algeria or Tunisia, which represent ecosystems in full form.” Senegal and Ghana are reportedly knocking on the door of the selected group more innovative Powerhouses and the list of countries creating attractive startups stretches across countries like Tanzania, Algeria, Mauritius and Tunisia completing the top 10. Reaching 30 countries that have signed deals worth more than $100,000 to nurture these burgeoning businesses and strengthen these ecosystems.

The strategic alliance between Europe and Africa

Faced with the consolidation of African innovations, Samir Abdelkrim calls for European cooperation, precisely to strengthen the position of both continents and create a counterbalance to the American GAFAM (acronym by which companies in the technology sector are known due to the contraction of Google, Amazon , Facebook, Apple and Microsoft) and the big Asian technology companies.

“African actors may create some dependency on these companies, but what they are telling us is that what they really need is GAFAM. There should be an African standard for digital sovereignty that does not yet exist. On the other hand, there should be much more cooperation for innovation between Africa and Europe. Europe is also hostage to GAFAM, so you have two weak continents that should work together because in reality they are victims of the same situation,” Abdelkrim warns. “We have to develop an alternative together. And that without losing sight of Huawei or the big Asian corporations,” says the expert.

This globetrotter of African innovation ecosystems points to a solution to ensure African and European digital sovereignty: “We need to think about how to create Euro-African centers of excellence in technological innovation, how to do real scientific collaboration and how to share research . It is time to recognize Europe’s weaknesses in order to react; and seek accomplices and allies. And I think Europe’s only chance is Africa, and at the same time Africa’s only chance is Europe.”

You can follow PLANETA FUTURO at TwitterFacebook and Instagram and subscribe to our “Newsletter” here.