Africa has the second fastest growing GDP in the world and the continent saw a record USD1.4 billion of venture capital (VC) flow through 139 deals last year, according to a recent report by the African Private Equity & Venture Capital Association (AVCA). 2019 saw double the USD700 million invested in 2018 and a 17% jump in the number of deals to 114.
The report found that more than USD3.9 billion was invested through 613 VC deals over the last five years driven largely by the increasing presence of foreign investors attracted by new opportunities and markets. North American investors were involved in 42% of the deals in the region between 2014 and 2019, followed by European-based investors at 23%. Africa-based investors contributed to 20%, while Asia-Pacific and the Middle East accounted for 8% and 6% respectively.
On a regional basis, southern Africa attracted the highest number of VC deals (25%) in Africa during the period, followed by East Africa (23%) and West Africa (21%). South Africa had the most VC deals with 21% of the total early-stage investments, while Kenya received 18%, Nigeria 14% and Egypt 9%.
By value, deals in consumer discretionary (28%), financials (23%) and industrials (18%) attracted the largest share. The utilities sector was also popular among early stage deals, with investors supporting companies that provide alternative power solutions.
Financial technology (fintech) firms dominated the African start-up scene, but afro-entrepreneurship has also grown within the utilities, logistics, transportation, e-commerce, healthcare and agribusiness sectors.
Nearly one third (32%) of the total number of early-stage investments reported in Africa in the period were seed stage deals – initial equity funding for start-ups. Series A and Series B transactions (subsequent rounds of funding after start-ups have developed strong track records) together accounted for 29% of the total volume and 38% of the total value of early stage deals.
However, 65% of the total number of VC deals reported were below USD5 million, while 25% were between USD5 million and USD20 million, and just 3% were above USD50 million in size.