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Investors are pumping money into African startups

October 1, 2021
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Why this is important to Wisconsin businesses: Venture capitalists have a favorable view of technology companies in Africa.

Digital technology startups in Africa are getting more and more successful at raising capital.

Up to $2.8 billion in venture capital funding is expected to come to Africa in 2021 by the time year-end totals are available—significantly higher than the $2 billion total investment 234 tech companies attracted in 2019.

A report by AfricArena, using Partech data, predicts that venture funding could jump to $10 billion or more by 2025.

A number of factors have driven the increase, including interest from European venture capital funds, more corporations allocating capital toward activities in Africa, and acquisitions of African tech companies by corporations that are expanding globally.

In terms of individual countries, Nigeria and Kenya lead the list, with $307 million raised by Nigerian startups and $305 million by companies in Kenya in 2020. Egyptian startups attracted $269 million and South African companies $239 million.

According to Disrupt Africa’s African Tech Startups Funding Report 2020, one of the fastest growth areas is in financial technology, or fintech, companies. The report showed that 99 fintech companies across Africa raised a combined $160 million in 2020, an increase of nearly 50% over the previous year.

The report counts at least 370 active investors, a 42.8% year-over-year growth.

Two important, early fintech firms got their start with South Africans: Paypal with Elon Musk and Thawte Consulting with Mark Shuttleworth, both firms that radically altered the global digital landscape.

A lack of funding is the biggest challenge for entrepreneurs in Africa, according to a 2015 study. GeoPoll surveyed a total of 1,000 entrepreneurs in the Democratic Republic of Congo, Ghana, Kenya, Nigeria and South Africa. Asked what resources were most needed to encourage entrepreneurship, 36% said more financing, 24% said better facilities and services, and 23% called for more government support.

Internet development is allowing information technology to be used broadly across Africa. Africa’s largest independent fiber broadband network is operated by Liquid Intelligent Technologies, spanning over 100,000 kilometers (62,137 miles) of line throughout the continent. Given Africa’s position as a new market for broadband mapping, it could leap ahead of older generation systems, possibly ignoring 5G in favor of satellite systems.

Wisconsin companies in the telecommunications market or investors looking for promising startups may want to explore the possibilities in Africa.

 

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