East Africa

Where, why and how to invest in African tech?

Africa Tech Summit London

The African tech startup space is bucking the continental trend, with more startups raising money than ever before explains Tom Jackson, who will be speaking at Africa Tech Summit London on how to invest in African tech.

According to the African Tech Startups Funding Report released earlier this year by Disrupt Africa, 146 startups from across Africa raised over US$129 million in funding in 2016, with the number of funded startup increasing 17 per cent from 2015’s figures.

This funding is coming from a variety of sources. International luminaries such as Mark Zuckerberg, Bill Gates and Steve Case have invested in African tech startups. Mobile operators like Safaricom and Orange are also active.

Meanwhile, private equity firms are stepping up activities, and there is a burgeoning angel investment scene. The African Business Angels Network (ABAN) is going from strength to strength, as are local equivalents.

Where to invest
It is unsurprising that South Africa, Nigeria and Kenya – especially the former two – are the most popular investment destinations in Africa, accounting for the vast majority of funding. These are the countries with the most established startup ecosystems on the continent, with more hubs and support organisations than anywhere else, and are logical “jumping off” points for the rest of the continent.

Yet there are signs of a “trickle down effect”, with investors gradually becoming more pan-African in their outlook. The total investment secured by startups from outside the “big five” – which also includes Egypt and Ghana – increased to 4.84 per cent this year from 1.3 per cent in 2015. North Africa especially is on the up, with the amount raised by Egyptian startups increasing by 62.5 per cent and Morocco and Tunisia also seeing growth.

What to invest in
If you have buckets of cash at your disposal, off-grid solar is the thing. But for those writing slightly smaller cheques, there are plenty of opportunities in the African tech space. Fintech proved the most popular in 2016, with startups in this space raising a combined US$31.4 million, 24 per cent of the overall total.

Other spaces have their appeal too, however. Investments in the likes of e-learning, e-health, agri-tech and logistics are on the rise, with investors increasingly diverse in their fields of interest. Some sectors are proving less appealing, however, with the long-term nature of e-commerce investments putting funders off the space.

Why to invest
All of these people can’t be wrong. Africa is digital’s “final frontier”, and is pretty much the only market in the world where there are huge numbers of potential users and customer still to be reached. This process is quickening as internet and mobile penetration increases. Africa’s developing economies and young tech savvy populations are a huge draw.

In areas such as fintech and e-health, there are major opportunities for returns to be had in providing people with services traditional incumbents have not been able to offer them. Investing in Africa also comes with the additional appeal that each investment has genuine impact and the ability to cure social ills.

How to invest
Put simply, go to Africa. Find out what specific problems are facing the continent and the innovative solutions that are being developed to fix them. You can’t expect to understand the scale of the opportunity until you have seen it for yourself. And this means going a little further afield than only Cape Town, Lagos or Nairobi.

Luckily, there is plenty of help available once you arrive. Before you go, check out platforms such as Appsafrica.com, Disrupt Africa and VC4A to help guide you. When you’re there, plug into local support organisations such as ABAN and Silicon Cape. Visit hubs like iHub, Barclays Rise and Co-Creation Hub. In Europe attend events like Africa Tech Summit London while in Africa visit Mobile West Africa  and DEMO Africa.

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