Funding for African startups slowed for the first time after nearly 10 years of growth as investors in the fledgling tech scene were put off by the Covid-19 pandemic, according to venture capital firm Partech Partners.
Companies on the continent raised $1.43 billion in 2020, down 29% from a year ago, Partech Partners said in a report. Just two deals above $50 million closed last year compared with 10 in 2019.
“There were hardly any mega-rounds in the African tech ecosystem,” the Paris-based firm wrote in its annual survey of startups 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.”
Africa is now showing an inverse trend to much of the rest of the world, including the U.S. where startup investing reached a record high of $130 billion in 2020, up 14% from the previous year, according to a Pricewaterhouse Coopers/CB Insights report. In Europe and Israel, overall funding increased albeit in fewer companies, according to data from Pitchbook.
Africa’s technology sector is still relatively small, though 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 done well include those that aim at filling 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 get smartphones.
2021 may see a return of big deals, Partech Africa General Partner Tidjane Deme said. “Many startups who delayed fundraising to wait for better market conditions will be fundraising. So the deal-flow at growth stage should be larger than usual.”
Still, the region attracted some funding, despite investors’ reluctance 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.
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 buy DPO Group and Stripe Inc. took over Nigeria’s Paystack for $200 million.