African startups yearn for more funds injection to grow faster
By Jeph Ajobaju, Chief Copy Editor
African startups have thrived in the past couple of years by attracting dollar inflows but they need to make progress to garner between $5 million and $50 million in the immediate future to meet demand and realise their global vision.
This is the kernel of a new report by Endeavor, the community of high-impact entrepreneurs in Nigeria, which underscores the untapped area as most deals sealed in the past two years were in the $0.2 million to $5 million range.
More than 600 African startups raised funds under $5 million between 2020 and 2021 and as they grow, they would require between $5 and $50 million, an opportunity for investors looking to invest in startups on the continent, it said.
The report projects that by 2050, Africa will be home to a third of the world’s young people, with the continent urbanising faster than other regions, and hosting one in six of the world’s internet users.
Summary of findings
- Most deals in Africa are in the $0.2-5million range, with $1-5 million bracket growing the fastest
- Over 600 deals in this bracket. Less than 150 in higher brackets $1-5 million round experienced the fastest growth compared with all brackets (142 per cent).
- Demand in the $5-50 million bracket likely to increase in the coming years when these 600 companies scale up.
- Given significant drop in deal activity from $5 million onwards, it is likely there will be insufficient supply to meet demand.
- This presents an opportunity for investors in larger brackets of $5m+
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Shedding more light on African market
The report sheds more light on African market dynamics to help investors build local market intelligence.
Investors are inclined to follow the money but Endeavor wants them to look beyond usual market opportunities and map out exit pathways.
Below are the views of some of the players, as reported by Nairametrics.
Tosin Faniro-Dada (Endeavor Nigeria Managing Director and Chief Executive Officer)
“The data gathered in this report is clear – Africa is the next digital growth frontier. The combination of our young and digitally savvy population, an emerging technology ecosystem, and the impact of the COVID-19 pandemic on behaviours is set to trigger an inflection point in our digitisation journey.
“We have been excited by the increased levels of funding that our entrepreneurs are attracting but we want to make it even easier for more investors to bring out their cheque books to catalyse the growth that we believe is pending.”
Topsy Kola-Oyeneyin (Partner at McKinsey and Company)
“We’ve seen a few eye-catching funding rounds and acquisitions in Africa’s technology ecosystem in recent years but the findings of this report suggest that we barely scratched the surface.
“A number of sectors across the continent are still underpinned by informality and fragmentation, limiting the availability and affordability of products and services.
“These opportunities for disruption abound across the continent and this report will make it easier for interested investors to adjust their business models effectively to capitalise on these opportunities.”