These are the 8 topics that shaped Africa's startup ecosystem in the first half of 2019

    Research Brief

The first half of 2019 has been a good one for African startups. As the continent continues to build towards a more robust ecosystem, there were events that took place which shall be looked back upon and seem monumental in building the continent. In this write-up, we take you back through H1 and capture what we think are the most relevant topics.

1. Increasing accelerator activity

In April, Founders Factory Africa announced the admission of the first five African fintech startups into their accelerator. These were: Schoolable and Eazyhire (Nigeria), LipaLater (Kenya), Kudigo (Ghana), and Digest Africa (Uganda). The corporate-backed accelerator with its origins from London launched in Johannesburg in October last year with the backing of Africa’s largest banking group Standard Bank. They also followed this by launching a new program focused on healthcare and pharma startups across Africa with the backing of South African firm Netcare. The accelerator’s plan is to back as well as build a total of 140 companies in its lifetime.

Antler, a global “startup generator” and early-stage VC, also launched in Kenya where it plans to build and fund more than 40 tech companies in the next 3 years. Founded in 2017 by Magnus Grimeland, co-founder of Zalora, Antler has held “successful” programs in Singapore and Stockholm, and are now replicating this success by expanding to Africa, London, Amsterdam, and Sydney. It started its East African operations across Kenya and Ethiopia and is looking to accommodate at least 40 “future founders”, and to have a minimum of 16 startups to invest $100,000 every year in Nairobi. In exchange for the investment, Antler would take a 20% equity stake in each startup. 

2. Funds closed/announced

French investor Partech doubled down on the African continent by closing its oversubscribed Partech Africa Fund of $143 million. The firm had announced the first close of the fund early in 2018. They also went ahead and opened up their second African office in Nairobi, following the one in Dakar. The Partech Africa Fund plans to make 20-25 investments across roughly 10 African countries exploring all sectors, over the next several years according to General Partner Tidjane Deme. It will primarily target Series A and B investments and some pre-series rounds at higher dollar amounts in the $500,000 range.

Emerging markets startup competition Seedstars also announced in April the launch of its hefty $100 million Africa fund in collaboration with Paris-based First Growth Ventures. The announcement was made by Seedstars World Chief Investment Officer Charlie Graham-Brown at the Seedstars Summit held on 5th April. The Africa-focused fund will become Seedstars’ first such regional fund. Similar to Partech’s, Seedstars Africa Fund is also dedicated to investments at the early venture [Series A and Series B] stage. Their ticket sizes will range from $250,000 to $5 million according to Graham-Brown.

Tunisia-based private equity firm AfricInvest also teamed up with French investor Cathay Innovation in April to launch a new Africa tech fund with a target raise of $168 million. The fund will primarily focus on Series A to Series C stage investments across Fintech, Logistics, AI, Agtech, and Edtech companies. In January, an early-stage investment fund for African startups Oui Capital announced its $10 million fund for pre-series A tech companies valued at or below $5 million from Kenya, Nigeria, and South Africa. The venture fund will invest in fintech, mobility, healthcare, and education companies, and simultaneously offer mentorship services from experts. 

Lastly, Naspers Foundry, a $300 million fund that was launched last year by Naspers, made its very first deal with a $2 million investment in South African cleaning service startup SweepSouth. 

3. European Governments are coming

In March, French President Emmanuel Macron, during a 3-day trip to Africa to boost trade with Ethiopia, Djibouti, and Kenya, announced that his country had set up an investment fund earmarked for equity investment in startups and SMEs. The $2.8 billion funds will go towards financing and supporting Africa startups and SMEs by 2022 through their Choose Africa initiative. The initiative would see the government supporting about 10,000 enterprises across the continent by providing credit, technical support, and equity financing. 

The German government followed suit in June when the German ambassador to Ghana Christoph Retzlaff announced a $1.1Billion Africa fund. Through the fund, the German government is looking to support African startups and small businesses, as well as German and European companies that are Africa focused. The fund is in fulfillment of the pledge made by the German Chancellor Angella Merkel during the G20 Compact With Africa initiative which was launched under Germany’s G20 presidency in 2017 to promote investment in Africa. At least 12 African countries form part of the initiative so far - Benin, Togo, Ghana, Ivory Coast, Burkina Faso, Guinea, Senegal, Morocco, Tunisia, Egypt, Ethiopia and Rwanda - and are the ones likely to benefit.

4. Ride-hailing startups are feeling the VC love

One of the major updates in the ride-hailing startup market was Egypt’s Swvl raising a whopping $42 million Series C in June. The mass transit startup’s round was led by Vostok New Ventures. This round brought Swvl’s total funding to at least $80.5 million across 4 different funding rounds.

In Nigeria, MAX.ng also received $7 million in funding from Novastar Ventures, Yamaha, Breakthrough Energy Ventures, Zrosk Investment Management, and Alitheia Capital. According to the company’s press release, $6 million of the investment came in as equity capital making up their Series A while the remaining $1 million was a grant. Another of Nigeria’s motorcycle-hailing apps, Gokada, raised $5.3Million in a Seed A round led by Rise Capital and joined by Adventure Capital, IC Global Partners, and Illinois-based First MidWest Group to grow its transit business. 

To finance their expansion efforts to Nigeria, Ugandan motorcycle-hailing startup SafeBoda raised an undisclosed Series B round in May that was co-led by Allianz X and Go-Jek’s investment arm GO-Ventures. This round of funding came after SafeBoda had initially raised a $1.1 million Series A funding last year that Digest Africa reported on

5. Future of transportation in Africa

Global ride-hailing giant Uber announced plans to dabble into boat hailing services in Nigeria’s economic hub Lagos. The company made this announcement immediately after two other Nigerian startups - Gokada and Max.ng - had already relayed their boat-hailing services plans. 

However, of all the three players, Uber is the entrant with experience offering the service elsewhere. The ride-hailing company pointed out early in the year that they had already tested and launched the service in Mumbai, India over the first few months of 2019. According to the company, they see water transportation developing into a core offering alongside other public transit systems. 

6. Mega rounds

Andela received a whopping $100 million in a Series D round led by Generation Investment Management with participation from existing investors including Chan Zuckerberg Initiative, GV (Google Ventures), Spark Capital, and CRE Venture Capital. This round brought Andela’s total funding to $174.61 million over 5 rounds. It also pushed the company among Africa’s most capitalized startups.

In May, mobile health payments platform CarePay International also raised $44.9million in a Series A round to expand into new markets. The Amsterdam and Nairobi-based company was launched in Kenya in 2015 as a partnership with mobile operator Safaricom, and this is its first funding round, led by Elma Investments, IFHA, and PharmAccess Foundation. The round ranks among Africa’s highest Series A rounds.

7. Exits

In April, African e-commerce giant Jumia officially listed on the New York Stock Exchange. It opened with its shares trading at $14.50 under the ticker symbol JMIA. This came as a significant win for Jumia’s major shareholder MTN Group who had long been reported to be looking to exit the startup. 

Usually, startups are acquired by the more established firms. However, in H1 2019, six-year-old Ghanaian startup mPharma acquired Kenya’s second-largest pharmacy chain Haltons, with an estimated worth of $5 million. It also saw the participation of Nairobi-based Novastar Ventures. The startup took control of Haltons from Fanisi Capital, a Mauritius-based private equity firm, but senior management at Haltons will retain a piece of the pie in the business. 

MPharma manages prescription drug inventory for pharmacies and their suppliers, and now, entered the East African regional market. The acquisition added 20 Halton stores to the startup's portfolio that is now split between Nairobi and Mombasa. The deal came in motion as mPharma worked on completing a $12 million Series B funding round led by 4DX Ventures, an Accra and San Francisco based VC firm.

8. What makes a startup African?

The announcement of Jumia as “Africa’s first tech startup to be listed on the NYSE”  in April sparked a continent-wide debate on what actually makes a startup “African”. While the company runs the largest e-commerce business across Africa with operations in 14 countries, it was founded by two French nationals, incorporated in Germany with its headquarters in Dubai. Jumia’s technology and engineering team is based in Portugal and is listed on the New York Stock Exchange.  So, the question remains: What makes a startup African?

Ventureburn ran a series of stories on the topic in a bid to answer the question. Digest Africa CEO and co-founder Peter Kisadha was also among the people the South Africa publication interviewed on the topic. He pointed out that it’s not easy to classify whether a startup is African or not because of globalization. “It is therefore not easy to classify whether a startup is African, given how easy it is for a company to now distribute itself across the globe,” he said. 

However, at Digest Africa, we rely on a methodology that focuses on only three things: where the economic value of that startup’s existence falls. We are able to come to a conclusion regarding that by studying two things; if a startup is either headquartered in Africa or has the continent as its primary or only market, it qualifies as an African startup. 

Digest Africa

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