The African Private Equity and Venture Capital Association (AVCA), the pan-African industry association which promotes and enables private investment in Africa, released its inaugural report on VC, entitled Venture Capital in Africa: Mapping Africa’s Start-up Investment Landscape.
The report analyses the exponential growth of VC in Africa over the 2014-2019 period, focusing on deal trends. Despite the relative infancy of the VC ecosystem across the continent, the sector has attracted significant international investment while local VC firms and innovation hubs have also expanded considerably.
Between 2014 and 2019, 613 VC deals were reported in Africa with a total value of US$3.9bn. Notably, 2019 marked a six-year high in VC activity with 139 deals worth US$1.4bn – the highest year on record. The number of deals more than doubled between 2014 and 2019, while the value of deals almost doubled between 2018 and 2019.
Fintech and Information Technology dominated the African start-up scene, with each sector accounting for 19% of the total volume of VC deals reported on the continent between 2014 and 2019, followed by Consumer Discretionary (18%) and Industrials (12%). Communications Services, Health Care, and Consumer Staples collectively account for 19% of the volume of VC deals over the same period.
In terms of geographies, Southern Africa attracted the highest volume of VC deals (25%), followed by East Africa (23%) and West Africa (21%), while multi-region deals attracted the largest share by value. Multi-region deals had the largest median deal size at US$7.5mn, followed by West Africa and East Africa at US$3mn and US$2.2mn, respectively.
South Africa’s well-developed VC ecosystem accounted for 21% of deals between 2014 and 2019, closely followed by Kenya (18%) and Nigeria (14%). Over a fifth, (21%) of the total number of VC deals over this period were in companies headquartered outside of Africa raising capital to expand or strengthen their presence on the continent.
While seed funding accounted for nearly a third (32%) of the total number of deals reported in Africa between 2014 and 2019, these transactions accounted for only 5% of the total deal value. Series A and Series B deals together accounted for 29% of the total deal volume and 38% of the total value of early-stage deals.
The report also sheds light on deal sizes, with almost two-thirds (65%) of reported deals being below US$5mn in value, while a quarter (25%) were between US$5mn and US$20mn. Just 3% of deals over the reporting period were above US$50mn.
The report also provides authoritative data on the types of investors participating in VC deals, the involvement of impact investors, and the breakdown of investors by region, as well as case studies on several VC investors including AfricInvest, Alitheia Capital, Helios Investment Partners, and IFC Venture Capital.
‘Tokunboh Ishmael, Chair, AVCA Board noted, “Africa’s VC industry continues to grow from strength to strength and we expect 2020 to be another strong year despite global macroeconomic headwinds. The continent’s VC ecosystem showcases the best of African innovation and entrepreneurship, which has the potential to be a key source of solutions to Africa’s intractable problems and a gamechanger for the continent’s development trajectory. AVCA remains committed to supporting the VC industry by charting its growth and providing authoritative research on the asset’s fundraising, deal, and exit activities.”