African tech: record investments driven by FinTech

by bold-lichterman

The 2 billion mark has been crossed. In 2019, African start-ups raised $ 2.02 billion in equity, up 74%, according to a new report from venture capital fund Partech Africa. The study identifies equity fundraising by African companies in the tech and digital sector, which exceeds $ 200,000.

The number of start-ups that have raised funds is also exploding from 146 to 234. 158 rounds of funding even exceeded one million dollars,

85% of funds concentrated in 4 countries

But a significant concentration is taking place since 85% of the volumes invested are granted to start-ups from only four countries: Nigeria, Kenya, Egypt and South Africa. Nigeria alone attracts 37% of amounts invested and Egypt entered the top spot. So far, the historic top Nigeria-Kenya-South Africa trio has been established but this year Egypt overtakes South Africa in total amount invested and surpasses Nigeria in number of transactions.

An entry on the podium which is partly explained by the infrastructure projects put in place by the current political regime to increase the access of Egyptians to the internet. Several entrepreneurship and business creation incentive programs have also been launched in the country.

Credit: Partech Africa

The remaining 15% of the amounts raised are concentrated in only 18 African countries against 19 in 2018 while the African continent has more than fifty countries.

In addition, significant densification appeared in the first rounds of investment with 206 transactions (+ 57%) in seed and Series A, proof of the confidence of investors who are taking positions earlier and earlier in start-ups. African. The more mature B Series and the Growth confirm the sustained pace posted over the past three years, with 25 and 19 transactions respectively. 10 rounds of funding even exceeded $ 50 million.

Priority to FinTech

LFinTech attracts 41.4% of the amounts invested to reach $ 836 million, up 120% from last year. ” FinTech is clearly exploding on the continent with more and more digital players allowing start-ups to serve the segment. This is one of the reasons why venture capital investors now have a bigger playing field than traditional private equity investors had before. We see them positioning themselves in tech, on the lookout for interesting opportunities », Explains Tidjane Dème, General Partner of Partech Africa.

Credit: Partech Africa

The African financial market and more precisely the banking market indeed represents a great opportunity. “Africa’s retail banking penetration is just 38% of GDP, half of the global average for emerging markets», Recalled McKinsey & Company in a report published in 2018. However, to take advantage of this latent market, we must succeed in overcoming certain difficulties such as the widespread use of cash or the poor coverage of credit bureaus. FinTechs then enter the scene to meet existing needs.

More than 60% of investments made in Nigeria are precisely focused on FinTech. Thus, it is not surprising that the first nigerian unicorn or a FinTech. Interswitch, founded in 2002, creates and manages a payment infrastructure and providing transactional products and services in different African countries. The company raised nearly $ 200 million from Visa in November 2019.