Report: Nigeria, Other African Start-ups Raised $477m Across 91 Deals in January

Emmanuel Addeh in Abuja

A report by Renaissance Capital yesterday indicated that Nigeria, South Africa, Egypt and Kenya regarded as the “Big Four” accounted for over 50 per cent of the $477 million raised by African start-ups in January this year.

Some of the hugest investors on the continent, the report stressed, included Instadeep, operating in the deeptech space, with $100 million, Copia in the retail sector with $50 million, mPharma in the health technology segment invested $35 million, while Asaak in the Fintech start-up space invested $30 million.

“African start-ups raised a total of $477million, up 35 per cent month-on-month and 116 per cent year-on-year, across 91 deals, also up 60 per cent m-o-m in January,” it noted.

Across verticals, the report stated that Fintech accounted for 27 per cent of the funds raised but faced stiff competition from Deeptech, buoyed by Tunisia-based Instadeep’s $100mn Series B and Retail-tech, which accounted for 21 per cent and 18 per cent of total funds raised YtD, respectively.

On a geographical basis, the big four (Nigeria, South Africa, Egypt and Kenya), the report said, saw their perennial leadership position challenged, as they combined to account for a little over 50 per cent of the funds raised.

This happened even as Tunisia saw its largest singular fundraise ever, giving it a 21 per cent share.

The report also examined global changes in the price of cash and implications for tech/fintech valuations, stating reasons why it expects deal-making to remain frenetic.

The firm stated that as it noted in its 2022 Africa tech/fintech outlook note, the compression in public market valuations was already feeding into private market valuations —at least in developed markets.

“We think it is important to contextualise what is happening – the cash pile remains high (the global dry powder in private equity, VC and SPACs as at mid-December 2021 exceeded $900bn, with 1 per cent focused on Africa).

“But the price of that cash is what is rising, hurting valuations across public and private markets as access to cash potentially becomes tighter over time,” it said.

It added: “Considering the above, we expect deal-making to remain frenetic and, in an African context, to see more investor sensitivity towards actual business delivery versus targets.

“This is with more pressure on larger and later-stage funding rounds, as valuation sensitivity tends to be much lower at earlier stages,” it pointed out.

The African tech ecosystem, it stated, is also still relatively nascent in its development, with only eight unicorns as of FY21, representing less than 1 per cent of the 959 global unicorn count.

“That said, in line with our 2022 expectations, January saw the continuation of Africa-focused VC fundraises, including TLcom Capital and Norrsken22,” the firm said.

Quoting Prequin, a London-based financial research and intelligence firm, Renaissance Capital, said that as at October 2021, there were 120 Africa-focused private capital funds in the market looking to raise $17.6 billion, with VC representing $2.8 billion.

Also, it noted that more global VC funds are increasingly paying more attention to Africa, as for example Fintech VC, QED investors, recently announced two senior hires to focus on Africa.

“ In Nigeria, we continue to hear that after a two-year stall, the Central Bank of Nigeria (CBN) has been issuing more licences to Fintechs over the past few months, which implies an even more competitive dynamic in the year ahead,” it added.