Welcome Sub-Saharan Africa: Opportunity in Alternatives
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As we add data sets from Sub-Saharan Africa (SSA), to now cover the Venture Space across the entirety of Africa, our aim is to track VC activity in equally anticipated Emerging Venture Markets in search of benchmarking, lead generation, and trend spotting opportunities. With the influx of international investor interest, growth of local VC and startup activity, and the expedited Tech adoption, Sub-Saharan Africa remains a budding and conducive environment for investments of great impact and returns.
Similar to other Emerging Venture Markets, VC activity in SSA has observed a record-breaking year in 2021. Despite a dip in funding in 2020, startups in SSA have observed a 247%YoY increase in capital raised in 2021 YTD and kept a steady 3-year consecutive growth in number of transactions growing by 23% since 2019. In order to examine the nature, drivers, and attributes of this startup landscape, observing both the highest number of transactions and largest capital invested in 2021, we explore the top industries over the past 3 years.
FinTech and Energy industries have been on gradual growth to rank on the top of the most-funded industries between 2019 and 2021. We explore the evolution and nature of these industries:
FinTech: Infrastructure & Alternatives
Out of the top 3 most-funded industries FinTech, Energy, and Transport and Logistics (T&L), FinTech was the only ecosystem to remain the top-funded and most active (by number of transactions) in every year between 2019 and 2021. Observing a 1,120% YoY growth in capital raised in 2021, FinTech startups in SSA have accounted for more than 70% of all capital raised in 2021, bringing aggergate industry funding to overhas $1 Bn in the past 3 years. Despite a 70% YoY dip in funding in 2020, the FinTech industry (similar to T&L) has been observing a 3-year consecutive growth in deal flow; growing by almost 40% since 2019.
An increased investor appetite and funding focus in FinTech and digital financial solutions is an attribute to many Emerging Venture Markets as startups drive and serve the ecosystem’s digital adoption. While FinTech startups in MENA focus on digital payment solutions and innovative models, while Turkey and Pakistan startups seem to show interest in digital credit and micro-loan mechanisms, FinTech startups in SSA seem to be focused on solving 1 critical issue: The Non-banked demographic looking to access and move money easily.
For this reason, startups like Opay and Wave Mobile Money focused on facilitating digital payment services and online financial solutions have closed major rounds in the past 3 years. While some startups like Yoco specialize in serving small and medium-sized businesses, other macro-scope startups like TymeBank have been rolling out digital financial solutions to eventually provide a fully digital banking experience accessible to everyone. As FinTech startups lay out the financial infrastructures and find alternative digital channels to fill the gap left by traditional banks, other startups like Bitfxt have set their eyes on the future, creating safe and easy platforms for investment and trade in digital currency.
Energy: The Bright Opportunity
The Energy sector in SSA has proven to not only be efficiently innovative but also provide a vital source of sustainability while traditional energy sources struggle to fulfill the growing needs of the ecosystem. Overall, startups focused on Energy in SSA have observed a 200% increase in number of transactions in 2019 YTD, with a 50% YoY growth in capital raised in 2021 YTD. Most interestingly, the highest number of transactions (16) closed by Energy startups was in 2020, where more than $150M has been invested in Energy startups across 43 deals YTD since 2019.
The environmental makings, an abundance of alternative energy resources, and the lack of self-sufficient traditional energy sources are some of the drivers that make the Energy sector unique to the SSA market. Startups like Arnergy and Daystar Power, raising major rounds in the industry, have focused on providing Solar panels for households as well as commercial and industrial companies. The alternative energy sector seems to be developing steadily creating a complex and thriving network, pushing startups to adopt long-term leasing and other efficient financial models. The emergence of startups like Solarise Africa providing smart and Tech-driven financial solutions powering the drive towards alternative energy remains critical.
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