Insights from an analyst
This week we caught up with Africa startup analyst, Maxime Bayen. In late 2019, Maxime started tracking startup funding data across Africa. To date he’s captured hundreds of deals, totalling close to $3B, across the continent. Read on for more.
What’s the most interesting startup you’ve worked with ?
All the startups I have had the chance to work with over the past few years are really interesting and I could speak hours on each of them. But as you asked to pick one, I will chose Amitruck in Kenya.
Amitruck is a Nairobi-based startups launched by Mark Mwangi back in 2019. It’s a digital marketplace for trucking logistics in Africa. They are tackling a huge problem on the continent - the high cost and lack of transparency within the transportation and logistics space.
Their platform intelligently matches cargo owners who need transportation with trucks or fleets owners who have capacity. The latter can simply bid transparently for the job.
The entire process is covered by insurance and the cargo owner is consistently and digitally informed about the journey. They have completed over 9,000 trips already, moving mainly essential goods like food and sanitation material.
The reason I picked Amitruck is actually that they are currently running a crowd-lending campaign to accelerate their growth, so if anyone wants to lend from as low as €50 (at a 5% return rate over 12 months), you can find out more here.
In your view, what is the greatest challenge facing African startups right now?
Geographic expansion. In Africa, any startup fundraising from investors, regardless if they operate in Nigeria or Lesotho, will have to answer the question: what’s your expansion plan in the coming years?
You are expected to expand, quickly. And Africa is 54 countries, all very different from one another, with different languages, different cultures, different currencies, and different regulations.
So expansion is a really complicated thing to get right in the continent. If you look carefully, with a few exceptions for mainly pure-software companies, not many startups have been able to successfully expand outside their home market in Africa.
Are there any government schemes you can cite which have proven to bolster innovation within an African country?
The wave of “Startup Acts” started in Tunisia couple years ago and now seen in Senegal, Ghana or Mali is really promising.
These include things like tax and social security contribution reductions, access to forex bank accounts or access to subsidised salaries for founders.
Having these facilitating regulations in place makes a massive difference for new entrepreneurs and is needed to create a growing ecosystem.
What makes the African startup scene different to the likes of Silicon Valley and the European startup scene?
The heterogeneity of the 54 African countries I referred to earlier is a massive difference to start with.
All startups and investors in Silicon Valley work in the same currency. Same thing in Europe. That’s not the case in Africa and it changes everything.
Beyond this, looking at the nature of the startups in the continent, a big difference can be seen in the type of solutions and problems being solved.
The immense majority of startups in Africa are solving very large problems that are affecting millions and millions of population. Access to banking, payments, electricity, education, transportation, and healthcare. The list goes on.
Often areas where public institutions haven’t been able to put in place real solutions and are hence now picked up by private companies.
In one of your latest presentations you mention that over 67% of investment in African startups derives from outside the continent. How do you think this will change in the next 5 years?
Around 350 investors have signed cheques to startups in Africa in 2020. Among them, 109 are based in Africa, so around a third. Another third are based in North America.
This ratio could seem low for investors in the continent, but the good news is that it’s definitely growing with an increasing amount of new African angel investors and VCs deploying capital each year. I am very confident that in less than 5 years from now this ratio will be at around 50%.
Do you see any particular startup categories/industries outpacing others over the coming years?
If we look at 2020 again, according to data I have compiled, Fintech and Energy remain by far the leading sectors (50% and 13% of the total funding raised by startups in Africa in 2020 respectively).
However, 3 sectors have all raised around 7% each of the total funding and are definitely growing: Logistics & Transport, Agriculture & Food and of course Healthcare which jumped from 2% in 2019 to around 7% in 2020.
Coming back to my earlier point, those are all absolutely essential sectors. Education could logically be next.
As someone who is privy to a lot of African startup investment data, what are some of the most interesting insights from 2020?
For me the most interesting point is that the number of startups that are scaling in the continent has really exploded this year.
If we consider startups that raised $1M or more in 2019 across Africa, the total was at 94. In 2020, the exact same metric stands at 158. There are basically close to 70% more startups in Africa that raised $1m+ in 2020 than a year ago, despite the global health crisis.
This is a great news as this in turn leads to more exits which in turn leads to more investment in new startups on the continent. The start of a virtuous circle for startups in Africa!
In the News 🚀
📚 West African edtech company uLesson raised a $7.5m Series A led by Owl Ventures.
🇰🇪 Kenyan agritech insurance startup, Pula, raised $6m Series A round led by Pan-Africa early-stage VC firm, TLcom.
🇿🇦 South African crypto exchange, OVEX, announced a strategic investment from quantitative cryptocurrency trading firm Alameda Research.
📈 2020 was a record-breaking one for African startups, with 397 companies securing over US$700 million worth of investment.
🇺🇸 Across the pond things are going gangbusters for Gamestop. Their share price has rallied 134% in last 24 hours thanks to a short squeeze from a subreddit known as wallstreetbets.