The second edition of the annual African Tech Startups Funding Report, published by Disrupt Africa, finds African tech startups raised almost US$130 million in funding in 2016.
The report contains statistics and analyses for a host of African countries, as well as nine sectors. It also makes available data on startup acquisitions which took place in 2016; as well as the results of surveys relating to preferences and trends within the entrepreneur and investor communities on the continent.
VC4A community members can obtain a 25 per cent discount on purchasing the report using the code “angelspecial” here. Below are five key trends pertaining to investments in African tech startups in 2016.
1. More startups raise less money
A total of 146 tech startups from across Africa raised funding totalling US$129.1 million in 2016, demonstrating significant growth on the previous year in the number of companies raising money, even though the total amount raised fell year-on-year.
The general theme of 2016 was more rounds, but with fewer standout tickets. This suggests there is a growing appetite to invest in African startups at an earlier stage, with the angel investment scene on the continent growing in size.
2. Peripheral markets see more interest
Unsurprisingly, South Africa, Nigeria and Kenya remained the three most popular investment destinations, followed by Egypt and Ghana. It is clear which countries are the most attractive to investors.
We are starting to see a trickle down effect to startups in other countries, however, as investors gradually become more pan-African in their outlook. The share of total investment secured by startups from outside the “big five” increased to 4.84 per cent this year from 1.3 per cent in 2015.
3. Egypt is back
Funding gradually began to return to the Egyptian tech space after a number of years in 2015, and that process continued as 2016 progressed.
The amount of Egyptian startups that secured investment increased by 62.5 per cent, with total funding increasing by 105 per cent. Moroccan and Tunisian startups also had a good year, suggesting investors are returning to the region as it puts political turmoil behind it.
4. Fintech the biggest beast
Fintech became the most popular sector for tech investment in 2016, with startups in that space raising 24 per cent of the overall total.
Investors clearly see huge potential in tech startups to reach unserved or underserved populations with financial services, and are putting their money behind such companies in their droves.
5. Impact is big business
There is certainly a valid argument that any investment in an African business is an impact investment, but sectors that very clearly fall into that category – fintech aside – had a good year.
While investments in, say, e-commerce companies fell off a cliff, other sectors shone. E-health was the third most popular category by number of startups and the fourth for total funding. Agri-tech saw a 8,660 per cent increase in total funding, while e-learning also performed better. Clearly investors are looking for social impact as well as financial returns.