Tech in 2022: What’s Next After the Unicorn Pandemic Boom?
Investment flows into the African tech ecosystem have increased significantly over the past few years.
In 2020, African startups raised a record $2.4 billion, a figure that more than doubled in 2021 to $4.9 billion, according to data collected by Briter Bridges.
It is clear that the appetite for investment in African technology has not diminished throughout the pandemic. In fact, many business models have been boosted by Covid-19, as digital platforms have quickly become an easy way to deliver services amid widespread lockdowns and social distancing.
The boon for tech companies has been reflected in the number of companies that have hit the $1 billion valuation mark – to become unicorns during the pandemic.
Fawry, the largest payment platform in Egypt, has become the 3rd in Africard unicorn in October 2020 after its stock price rose more than 20% on the local stock exchange.
Nigerian payments company, Flutterwave, followed soon after in March 2021 when it raised $170 million in a Series C round to propel it to unicorn status.
The company is reportedly in talks with investors to raise a new seed round, pushing its valuation to $3 billion or more ahead of a potential IPO.
Senegal-based mobile money provider Wave was added to the list in September when it raised $200 million in a Series C, taking its valuation to $1.7 billion.
The deal broke several records: it was the biggest Series A in Africa, the biggest round by a French-speaking startup, the first French-speaking unicorn in Africa.
While the main winners of the past two years have been fintech companies, there are signs that things are starting to change as we approach 2022.
African tech successes may have previously been limited to certain countries and sectors, but steady growth across the board has brought more and more companies on board.
Analysts expect to see Africa’s tech sector grow in depth and breadth in 2022.
Wave is a good example of a French-speaking company that has tilted American investors’ heads towards French-speaking Africa as a whole.
Its funding round was co-led by California heavyweights Stripe, Ribbit Capital, Sequoia Heritage and Founders Fund.
Banknote sizes in Francophone Africa have traditionally paled in comparison to Nigeria, Kenya and South Africa – countries that attract the lion’s share of US and European capital – and Egypt, which generally attracts capital from the Gulf.
With countries like Senegal, Benin, Morocco, and Ivory Coast starting to flex their tech muscles, big Francophone increases are expected to be much more frequent in 2022 and beyond.
The rising stars of the sector
Anglophone Africa also recorded notable successes last year. In July, South African edtech Go1 raised $200 million in a Series D funding round led by SoftBank Vision Fund, AirTree Ventures and Salesforce Ventures.
The e-learning platform has become Africa’s first edtech to achieve unicorn status, a sign that more African non-fintech startups are slowly hitting the $1 billion mark.
The gradual leveling of more sectors is illustrated by the number of startups closing relatively large cycles in 2021.
A total of 13 startups have raised over $100m in 2021, putting Africa on track for a record funding year.
Agritech, healthtech, cleantech and proptech are among the booming sectors that could make waves in 2022.
Taking proptech (property tech) – as an example, the property and real estate sector in Africa is definitely an area that needs an overhaul.
Startups range from companies providing developers with innovative digital platforms to save money and time on construction sites, to furniture delivery companies.
In June 2021, Nigerian proptech startup Seso Global raised $600,000 in pre-seed funding to develop software that enables property developers, agents and governments to manage their properties on a blockchain database. secure.
Launched in 2019, the startup expanded to South Africa the same year and entered Ghana in 2020.
It currently has more than 80 real estate developers and 7,000 real estate units on the platform.
Local donors rush in
Another trend analysts expect to see more of in 2022 is a proliferation of the types of funding available to African startups.
It has been shown that most of the financing for growth in Africa comes either from the United States or from Europe (including the United Kingdom).
However, there are signs that things are starting to change.
The past year has seen an increase in the amount of local funds that have stepped in to fill financing gaps, often for start-up businesses.
Hundreds of local angel investor groups have sprung up across the continent, with a steady increase in the number of incubation centers and acceleration labs.
Often these groups are the result of former startup founders who would like to put capital back into the local ecosystem.
Based in Lagos, Future Africa, founded by Iyin Aboyeji, co-founder of Andela and former Managing Director of Flutterwave, is an “early-stage venture capital fund that connects investors with mission-driven founders who transform challenges Africa’s most difficult challenges in global affairs”.
The fund has helped fund more than 30 African startups across the continent, including Nigerian fintech PayHippo, Kenyan wealth management startup Ndovu and digital company KYC Smile Identity.
Funding in Nigeria has grown so much that a group called the Lagos Angel Network has been formed to bring together all the major small financiers in the startup ecosystem.
But Nigeria is certainly no exception.
Egypt has had a multitude of incubators, accelerators and angel investors for many years.
HIMangel and CairoAngel are just two examples of angel investor groups.
The same can be said of Kenya and South Africa where successful founders are pumping money back into the ecosystem.
As a result, it’s likely that more and more local money will be used to fund local startups.
Debt Vs. Equity
Finally, another interesting change in the funding scene in Africa is the gradual growth of debt as opposed to equity to fund startups.
Venture capital and private equity firms have been the mainstay of technology financing globally and in Africa.
But there are signs that private lending is beginning to emerge.
In 2021, at least 6% of financing disclosed in Africa was debt financing.
Startups taking on debt include Trade Depot, Zola Electric, Ampersand, and SunCulture.
According to the founders, the advantages of equity financing are that they do not have to sell large parts of their business to equity investors.
So far, the space has been primarily used by development finance organizations like the IFC, but private investors are starting to enter the space as an alternative but growing asset class.