Launching the Digest Africa 2020 Index Report

    Digest Africa 2020 Index
    Report

Digest Africa brings you another edition of our reports in the Digest Africa 2020 Index Report. The report features a breakdown of the startup and investor performance for the year 2020 with a detailed analysis on key market trends of the ever changing African startup ecosystem. We partnered with global information services platform Crunchbase to showcase Africa’s global position in securing funding. We also partnered with Nairobi-based research firm Vasights Data & Research to support analytics and design. Below is a summary of the report. 

Digest Africa 2020 Index Report Executive Summary

COVID19 took center stage on the continent with a ripple effect on the economic and social construct, defining a new normal. This report therefore highlights the funding trends in response to the global crisis as the African entrepreneurs strive to grow and stay relevant to improving lives and creating opportunities on the continent. 

What started off as a promising year in line with expectations of startup investment growth for the year 2020 in line with previous trends, took an irresolute turn that the continent is still trying to recover from. Following our analysis on total disclosed funding from 2018 as $1.19 Billion that grew to $1.8 Billion in 2019 with a 51% YoY growth rate, it was anticipated that this would grow further in 2020. Leading up to 2020, VC funding had seen a 22% compound annual growth between years 2016 to 2019.

To 2020, the year recorded a total of 481 funding rounds, of which 361 (74.7%) were disclosed representing $854.6M in total disclosed funding, excluding exits. This is a 28.2% drop in deal count and 52.5% drop in value compared to 2019. $660.7M of the total was venture capital raised across 462 deals (344 disclosed and 118 undisclosed). Despite this huge drop in the amount of funding and the tough fundraising and business environment, entrepreneurs and businesses with strong value propositions that are reacting to and solving Africa’s challenges continue to attract funding. As a response to the effects of Covid19, we witnessed the emergence of many startup Initiatives from several governments and varying parastatals, impact investors, among others that set up funds to support many small businesses.

Compared with global peers, using Crunchbase data, the venture funding raised by African startups still represents less than 1% of global venture funding. In Spite of the tremendous growth over the years prior to COVID19, the gap in funding to African startups is still great and a lot needs to be done to raise awareness and shine a light on good entrepreneurs with valuable business models and addressing societal problems in Africa.

Tracking investments with a gender lens, the percentage of funding raised by startups with a woman on the founding team over the past 4 years has steadily ranged between 12% - 20%, the highest peaking in 2019 at 20.13%. 2020 presents $105.2M across 122 deals raised by startups founded by women, making up 14.53% of the total funding. This was a 5.6% percentile drop compared to 2019 where female led or co-founded startups raised $243.3M across 129 deals.

Out of the $660.7M, in disclosed Venture Capital raised, the West African region received the most funding with 236.8M across 155 rounds. This made up 36.7% of the total venture funding raised on the continent. Amongst the countries, Nigeria received the highest investment of $159.9M across 121 rounds with the Financial services industry attracting the greater of the funding ($57.6M across 25 deals).

Despite the covid19 slump, 10 countries have shown growth in disclosed venture funding relative to 2019. Ethiopia recorded a 9100% growth in disclosed funding to $2.3M from $25K, followed by Rwanda with a 749% increment ($3.1M from $365K), Senegal with 750% ($8.5M from $1M), Zambia with 171.4% ($3.8M from $1.4M), South Africa with 126.6% ($151.8M from $67M), Ghana with 126% ($63.3M from $28M) and Egypt with 33.5% ($83.2M from $62.3M). Malawi, Morocco and Mozambique that made no disclosed fundraises in 2019, also raised funding to the tune of $3.3M, $10.1M and $1.5M respectively.

2020 saw some of the biggest exits on the continent. A total of 25 M&A deals were recorded in the year compared to 56 in 2019 with 7 disclosed deals. For 2020, only 5 exits were disclosed representing a total collective value of $521M. The largest exit was the $288M acquisition of DPO Group by Network International. The majority of the acquired companies are based in Nigeria (6) and South Africa (5), and belong to the Financial Services industry (5 acquisitions).

$850M in disclosed investments was raised by 9 tech-focused Funds in various ‘Close’ stages, the largest being the Accion Quona Inclusion Fund managed by GP Accion with investment from Quona Capital and other undisclosed LPs. Y Combinator was the most active investor of the year, investing in 17 funding rounds that earned startups a combined total of $3.9M in disclosed funding.

To access the full report free of charge, subscribe to any of our annual packages on our website. You can also access the data behind our index report and/or purchase the report directly under insights

For customized data and analytics or to share with us a press release or fundraise, reach out to us at info@digestafrica.com

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