The realities of the new normal necessitated by the COVID-19 (coronavirus) pandemic have forced entrepreneurs globally to rethink business decisions. Entrepreneurs rode the pandemic wave in 2021, turning lemons into lemonades and thinking outside the box—in some cases, building new boxes. While the world dealt with the chaos caused by the pandemic in 2020, technology dictated how business should be conducted globally. Fortunately, African entrepreneurs were not left behind this time, as global lockdowns forced business owners and professionals to rely on technology if they were to remain profitable.
The need to reach a diverse range of consumers with products and services fueled growth in Africa’s startup ecosystem, transforming it into a hotspot for investors in 2021. In comparison to previous years, the continent has reported an increase in tech startups in various sectors such as fintech, e-commerce, logistics, ride-hailing, and agritech.
In H1 2021, African startups raised over $1.19 billion from regional and foreign investors. A report forecasts that venture capital funding for African startups would reach between $2.25 billion and $2.8 billion by December 2021. However, African VCs took on a bullish trend to a height of over $4 billion as against predictions. Nigerian startups retain about $1.37 billion of the $4 billion funding in 2021. VC funding in the continent is expected to reach $6.8 billion by 2023, exceeding $10 billion by 2025.
Will investments in African startups continue on this trajectory for the rest of the decade?
Speaking with Ventures Africa, Dami Sarumi, a venture capital partner and the founder of Vista Family Office, noted that the trajectory of investments in Africa’s startup economy will continue to increase because everybody wants a piece of Africa now. “There is a lot of dry powder to invest with all across the world. Investors are always looking for the right returns. Africa has a very young population and the ecosystem for them to invest in is humongous. I mean, we are very, very passionate about things. Moreover, we’re just scratching the surface when it comes to fintech and payments in Africa,” Sarumi said.
According to the wealth manager, investment in African startups will increase over the next decade. “This year, we’re expecting to do maybe 25 per cent or 50 per cent more of the figure we did in the investment landscape last year. And the numbers can only increase over the next four to five years. The opportunities are there in Africa. So our job as investors is to co-invest, work with the right investors to bring in more dry powder into the continent.”
Written by Ishioma Emi