African Start-up Investments Decline for the First Time in a Decade

In a report, Partech Partners said companies on the continent raised $1.43 billion in 2020, down by 29% from a year ago, which was just two deals above $50 million closed last year compared with 10 in 2019.

Funding for African start-ups has declined for the first time after nearly 10 years of growth as investors in the new tech scene continue to be repelled by the Covid-19 pandemic, according to venture capital firm Partech Partners.

In a report, Partech Partners said start-up companies on the continent raised $1.43 billion in 2020, down by 29% from a year ago, which was just two deals above $50 million closed last year compared with 10 in 2019.

“There were hardly any mega-rounds within the African tech ecosystem,” the Paris-based firm wrote in its annual survey of start-ups that have most of their operations in, or get the bulk of their revenue from Africa. “This sharp drop clearly marks the impact of the pandemic and subsequent lockdowns.”

According to a Pricewaterhouse Coopers/CB Insights report, Africa is now showing a reverse trend to much of the rest of the world, including the US where start-up investing reached a record high of $130 billion in 2020, up 14% from the previous year.

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Data from Pitchbook pointed out that in Europe and Israel, overall funding increased although in fewer companies.

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Africa’s technology sector, though relatively small, represents one of the highest-growth areas for venture capital investment. Investment into the region increased 74% in 2019, and more than doubled in 2018.

Companies that have performed very well include those whose aim is to fill gaps such as payment platforms that make up for a lack of access to conventional banking and businesses that take advantage of increasing internet access as more people acquire smartphones.

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According to Partech Africa General Partner Tidjane Deme, he said: “2021 may see a return of big deals. “Many start-ups who deferred fundraising to wait for better market conditions will be fundraised. So, the deal-flow at growth stage should be quite larger than the usual.”

Still, the region attracted some funding, despite investors’ unwillingness to chip in on larger rounds. The total number of deals rose 44% in 2020 from a year ago, according to the report. Four African countries, including South Africa and Kenya, received 80% of the funds, while Nigeria got the bulk of the equity, and Egypt signed the most deals.

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Deals last year, where venture capitalists take returns, included WorldRemit Ltd.’s $500 million acquisition of Sendwave, a money transfer service founded by Somalian Ismail Ahmed. Network International Holdings Plc signed a $288 million-agreement to acquire DPO Group and Stripe Inc. acquired Nigeria’s Paystack for $200 million.

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