The African Private Equity and Venture Capital Association (Avca) has released its inaugural report on venture capital (VC), titled 'Venture Capital in Africa: Mapping Africa’s Start-up Investment Landscape'.
The report analyses the exponential growth of VC in Africa over the 2014 to 2019 period, focusing on deal trends.
Despite the relative infancy of the VC ecosystem across the continent, the sector has, according to Avca, 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 $3.9-billion.
Notably, 2019 marked a six-year high in VC activity with 139 deals worth $1.4-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 startup scene, Avca says, with each sector accounting for 19% of the total volume of VC deals reported on the continent between 2014 and 2019, followed by consumer discretionary (18%) and industrials (12%).
Communications services, healthcare and consumer staples collectively accounted for 19% of the volume of VC deals over the same period.
In terms of geographies, Southern Africa attracted the highest volume of VC deals (25%), followed by East Africa (23%) and West Africa (21%), while multi-region deals attracted the largest share by value.
Multi-region deals had the largest median deal size at $7.5-million, followed by West Africa and East Africa at $3-million and $2.2-million, respectively.
According to Avca, South Africa’s well-developed VC ecosystem accounted for 21% of deals between 2014 and 2019, closely followed by Kenya (18%) and Nigeria (14%). Over a fifth (21%) 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%) of the total number of deals reported in Africa between 2014 and 2019, these transactions accounted for only 5% of the total deal value. Series A and Series B deals together accounted for 29% of the total deal volume and 38% of the total value of early-stage deals.
The report also sheds light on deal sizes, with almost two-thirds (65%) of reported deals being below $5-million in value, while a quarter (25%) were between $5-million and $20-million.
Just 3% of deals over the reporting period were above $50-million.
Avca chairperson Tokunboh Ishmael says Africa’s VC industry continues to grow from strength to strength.
As a result, AVCA expects 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 gamechanger for the continent’s development trajectory,” Ishmael says.