New research by startup funding platform VC4Africa shows considerable progress made by early-stage growth companies across Africa.
The VC4Africa 2015 Venture Finance in Africa report shows an increasing number of African businesses successfully growing their operations over time. They generate an increasing amount of revenue and add new jobs to the African market place.
VC4Africa aims to be the world’s leading social network for entrepreneurs and investors in Africa. The VC4Africa community has over 17,000 members in 159 countries, including 600 investors. 2000 entrepreneurs in Africa present their companies on the platform: early stage ventures that require investments less than USD 1 million. Each venture is scalable, makes smart use of technology, or is disruptive in their application of a business model.
There is little information available on this emerging segment and there are few comparative studies. VC4Africa reached out to entrepreneurs and investors part of the community to find out more about their progress. While VC4Africa’s data sets do not represent the total African investment space, the research certainly indicates key trends.
The research specifically looks at African early stage companies’ organizational advancement as measured by growth in revenue and the number of new jobs created over time. The report breaks down insights across 5 indicators: employment, performance, investments, investors and ecosystem.
VC4Africa Co-Founder Ben White comments, “From the research we know that entrepreneurs have been able to secure an increasing amount of venture funding compared to last year. Despite considerable gains the ‘missing middle’ finance problem persists (mid-level financing for early stage growth entrepreneurs), although narrower than when VC4Africa started in 2007.”
This is the second time VC4Africa has endeavored in the yearly research, an activity the community looks to build on in the future. Total invested capital more than doubled compared to last year’s research: from USD 12 million to USD 26,9 million. And the average amount invested per venture increased from USD 130K last year to over USD 200K this year.
The research shows 49% of the ventures start generating revenue in their first year of operation. 44% of the ventures are successful in securing external capital investment. The top investment categories are related to the Technology sectors, and then followed by Agriculture, Health, Finance and Energy. The research also reveals that ventures that participate in sector events, or join an incubator or accelerator, secure on average 23% more than their counterparts who do not participate in such programs. And of the 600 investors part of the VC4Africa community 82% invested in an African venture.
Three key trends from the research are a growing interest from African diaspora to invest in startups in their country of origin, the rise of local business professionals turned angel investor, and a growing appetite for cross-border investing in Africa generally.
VC4Africa released a summary version of the Venture Finance in Africa report freely accessible from the VC4Africa website. The full report is made available exclusively to the VC4Africa Investor Network (VC4Africa Pro Account holders and partners). People interested to receive the full report should register as a VC4Africa Pro Account user on the VC4Africa website or contact the team at VC4Africa.
The summary report gives an overview of the research results on 5 parameters (jobs created, revenue performance, investment, investors, ecosystem) and more. The full report contains more specific insights on the 5 studied parameters, includes more case studies and a comparison with last year’s results. VC4Africa invites people who would like to have more specific insights on certain regions or other findings to contact the VC4Africa research team: [email protected]
VC4Africa Co-Founder Ben White concludes: “We hope the research shows there are a growing number of businesses that are successfully growing their operations over time and adding much needed jobs to the African marketplace. This is a key message if we are going to get more capital involved in this space.”
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