The African Private Equity and Venture Capital Association (AVCA), the pan-African industry association which promotes and enables private investment in Africa, has 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 USD3.9bn. Notably, 2019 marked a six-year high in VC activity with 139 deals worth USD1.4 billion – 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 per cent of the total volume of VC deals reported on the continent between 2014 and 2019, followed by Consumer Discretionary (18 per cent) and Industrials (12 per cent). Communications Services, Health Care and Consumer Staples collectively account for 19 per cent of the volume of VC deals over the same period.
In terms of geographies, Southern Africa attracted the highest volume of VC deals (25 per cent), followed by East Africa (23 per cent) and West Africa (21 per cent), while multi-region deals attracted the largest share by value. Multi-region deals had the largest median deal size at USD7.5 million, followed by West Africa and East Africa at USD3 million and USD2.2 million, respectively.
South Africa’s well-developed VC ecosystem accounted for 21 per cent of deals between 2014 and 2019, closely followed by Kenya (18 per cent) and Nigeria (14 per cent). Over a fifth (21 per cent) 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 per cent) of the total number of deals reported in Africa between 2014 and 2019, these transactions accounted for only 5 per cent of the total deal value. Series A and Series B deals together accounted for 29 per cent of the total deal volume and 38 per cent of the total value of early stage deals.
The report also sheds light on deal sizes, with almost two-thirds (65 per cent) of reported deals being below USD5 million in value, while a quarter (25 per cent) were between USD5 million and USD20 million. Just 3 per cent of deals over the reporting period were above USD50 million.
The report additionally 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, says: “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 game-changer 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.”