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The venture capital scene in Africa has consistently grown, with an influx of capital from local and international investors reaching unprecedented heights in recent years. To understand how much growth has occurred, African startups raised a meagre $400 million in 2015 compared to the $2 billion that came into the continent in 2019, according to Africa-focused fund Partech Africa.
However, that figure isn’t the only yardstick. With other outlets like media publications WeeTracker and Disrupt Africa disclosing different results for the African venture capital market, we compared and contrasted their results last year. The result of that investigation detailed differences in methodology, as well as similarities.
In comparison to Partech’s $2 billion figure for 2019, WeeTracker estimated that African startups raised $1.3 billion while Disrupt Africa, $496 million for the same year.
It was expected that these figures would increase in 2020. But with the pandemic bringing in utter confusion and panic, companies downsized as investors re-strategized, and due diligence slowed during the first few months of the year. Also, new predictions came into light in May with some pegging expected deals to close between $1.2 billion and $1.8 billion by the end of the year.
Investments did pick up, and from July, VC funding on the continent had a bullish run until December. Although 2020 didn’t witness the series of mammoth deals in 2019 and didn’t reach the $2 billion mark, it proved to be a good year for acquisitions. Sendwave’s $500 million purchase by WorldRemit; Network International buying DPO Group for $288 million; and Stripe’s larger than $200 million acquisition of Paystack were high-profile examples.
To better understand how VCs invested in Africa during 2020, we’ll look into data from Partech Africa, Briter Bridges and Disrupt Africa.
Behind the numbers
In 2019, Partech Africa reported that a total of $2 billion went into African startups. For 2020, the number dropped to $1.43 billion. Briter Bridges pegged total 2020 VC for African startups at $1.31 billion (for disclosed and undisclosed amounts), up from $1.27 billion in 2019. Disrupt Africa noted an increase in its figures moving from $496 million in 2019 to $700 million in 2020.
Just as last year, contrasting methodologies from the type of deals reviewed, to the definition of an African startup contributed to the numbers’ disparity.
Cyril Collon, general partner at Partech says the firm’s numbers are based on equity deals greater than $200,000. Also, it defines African startups “as companies with their primary market, in terms of operations or revenues, in Africa not based on HQ or incorporation,” he said. “When these companies evolve to go global, we still count them as African companies.”
Briter Bridges has a similar methodology. According to Dario Giuliani, the firm’s director, the research organisation avoided using geography to define an African startup due to factors contributing to business identities like taxation, customers, IP, and management team.
For Disrupt Africa, the startups featured in its report are seven years or less in operation, still scaling, and a potential to achieve profitability. It excluded “companies that are spin-offs of corporates or any other large entity, or that have developed past the point of being a startup, by our definition of one.”
The continued dominance of fintech and the Big Four
Despite the drop in total funding, Partech says African startups closed more total deals in 2020 than previous years. According to the firm, 347 startups completed 359 deals compared in 2020 compared to 250 deals in 2019. This can be attributed to an increase in seed rounds (up 88% from 2019) and bridge rounds due to shortage of cash amidst a pandemic-induced lockdown.
A common theme in the three reports shows fintech, healthtech, and cleantech in the top five sectors. But, as expected, fintech retained the lion’s share of African VC funding.
According to Partech, fintech represented 25% of total African funding raised last year, with agritech, logistics & mobility, off-grid tech, and healthtech sectors following behind.
Briter Bridges reported that fintech companies accounted for 31% of the total VC funding over the same time period. Cleantech came second; healthtech, third; agritech and data analytics, in fourth and fifth.
Fintech startups raised 24.9% of the total African VC funding counted by Disrupt Africa. E-commerce, healthtech, logistics, and energy startups followed respectively.
2020 also showed the Big Four countries’ preponderance in terms of investment destination, at least in two out of the three reports.
The countries remained unchanged on Partech’s top five as Nigeria remained the VC’s top destination with $307 million. At a close second was Kenya accounting for $304 million of the total investments in the continent. Egypt came third with its startups raising $269 million, while $259 million flowed into South African startups. Rounding up the top five was Ghana with $111 million, displacing Rwanda which was fifth in Partech’s 2019 list.
The sequence remained unchanged from Disrupt Africa’s 2019 list as well. Funding raised by Kenyan startups reached $191.4 million; Nigeria followed with $150.4 million; South Africa, third at $142.5 million; Egypt came a close fourth with $141.4 million; while Ghanaian startups raised $19.9 million.
Briter Bridges took a different approach. Whereas Partech and Disrupt Africa highlighted funding activities per country of origin and operations, Briter Bridges chose to attribute funding to the startups’ place of incorporation or headquarters. This premise slightly altered the Big Four’s positions. Startups headquartered in the US received $471.8 million of the total funding, according to Briter Bridges. Those in South Africa claimed $119.7 million. Mauritius-headquartered companies received $110 million while African startups headquartered in the U.K. and Kenya raised $107.6 million and $77.1 million respectively.
On why Briter Bridges went with this narrative, Giuliani said the company wants its data to be an impartial conversation starter which can be used to investigate more complex dynamics such as the need for better policies, regulation, or financial availability.
This speaks particularly to the absence of Nigeria as a primary location for incorporation. Due to unfriendly regulations, business and tax conditions, Nigerian startups are increasingly incorporating their startups abroad and other African countries like Seychelles and Mauritius. It’s a trend that may well continue as most foreign VCs prefer African startups to be incorporated in countries with business-friendly investment laws.
Regional and gender diversity check
With an increase in startup activity in Francophone Africa, one would’ve expected an uptick in VC funding in the region. Well, that’s not exactly the case. Senegal, the region’s top destination for VC funding dropped from $16 million in 2019 to $8.8 million in 2020 according to Partech. The country was 9th on the list while Ivory Coast, placed 10th, raised a meagre sum of $6.5 million.
However, the good news is that 22 other countries received investments outside this Big Four this year, according to Partech data. Will we see this continue? And if yes, which countries will likely join the nine-figure club?
Tidjane Deme, a general partner of Partech Africa, believes Ghana might be next. He references how it previously used to be a Big 3 of Kenya, Nigeria, and South Africa before Egypt became a dominant force, and says a similar event might happen with the West African country.
“We see a clear diversification happening as investors are going into more markets. Ghana, for instance, is already attracting above $100 million. Of course, we all wish it would happen faster, but we also recognize that this is a learning process for both investors entering new markets and for founders learning about this game.”
Ghana also emerged in Giuliani’s forecast. He adds the likes of Tunisia, Morocco, Rwanda as second-tier countries quickly entering global investors’ radar and building more sophisticated ecosystems.
Tom Jackson, co-founder of Disrupt Africa, doesn’t mention any names. But he thinks that while there are some positives from other markets, the Big Four dominance will continue.
“Funding will filter down to other markets more and more, and there are already positive signs in that regard. But the space is still relatively early-stage and those four big markets have a big head start and will remain far ahead for years to come,” he said.
Another diversity check that cannot be overlooked is that of gender. Despite all the talk of inclusion, Briter Bridges reported that 15% of the funded startups in 2020 had women as founders, co-founders, or C-level executives. Partech, on the other hand, places this number at 14%. There’s still a lot of work to be done to increase this figure, and we might see more early-stage firms looking to plug that gap.
Source: https://techcrunch.com/2021/02/11/how-african-startups-raised-investments-in-2020/
Crypto-currency pioneer and early Bitcoin thought-leader Diana Biggs has joined Swiss-based startup Valour, which lets investors easily buy digital assets through their bank or broker. The move is significant with the news that Tesla has bought $1.5 billion worth of Bitcoin, thus massively boosting the mainstream markets for crypto assets. Biggs explored the potential for blockchain technology to help solve humanitarian challenges through her venture, Proof of Purpose, in 2017, and her TEDx speech on Blockchain Technology that year is considered by many in the blockchain space to be one of the best in the genre.
Valour, a Zug, Switzerland-based issuer of investment products, brought in Biggs, the former Private Banking Global Head of Innovation for HSBC, as CEO after recently launching Bitcoin Zero, a fee-free, digital asset ETP product, which trades on the NGM stock exchange.
Biggs, who has been in the Bitcoin space since 2013 told TechCrunch: “I have never seen this much attention to Bitcoin and other crypto-assets… The time for decentralized technologies has arrived, and their potential is increasingly realized by institutional investors.”
Johan Wattenström, the founder of Valour, said: “Diana is the perfect candidate to lead the company through this next phase of growth and expansion. With a wealth of experience in traditional finance, as well as fintech, and her vision for bringing digital assets into the mainstream, we feel very lucky to have her on board.” Wattenström created and listed the digital asset ETP on Nasdaq Nordic, in 2015.
Biggs is an Associate Fellow at the University of Oxford’s Saïd Business School and served as Head Tutor for their Blockchain Strategy Programme from 2018 to 2020. She is on the Board of the World Economic Forum’s Digital Leaders of Europe community and is a member of the Milken Institute’s Young Leaders Circle. Prior to joining Valour, Biggs was Global Head of Innovation for HSBC Private Banking, where she led on fintech partnerships and driving open innovation.
Spacelift, a startup that automates the management of cloud infrastructure, has raised $6 million in a Series A funding round led by London’s Blossom Capital. Polish fund Inovo Venture Partners and Hoxton Ventures are also investing.
The Polish and US-based startup is taking advantage of the opportunity presented by the increasingly complex cloud world, with what it dubs as an ‘infrastructure-as-code (IaC)’ and a ‘policy-as-code’ platform. This allows teams to automate processes, it says, in a more efficient manner without the risk of downtime.
Co-founder Marcin Wyszynski hit upon the idea after working for companies like Deliveroo in the UK and Berlin-based scooter operator TIER Mobility. The company is headquartered in Redwood City, California, US with an additional office in Warsaw, Poland.
Wyszynski said in a statement: “The switch to using cloud servers and infrastructure as code has benefits for businesses but it has created new challenges for teams, particularly when they are distributed. The slightest mistake can cause major outages and downtime which is obviously bad for business. We designed Spacelift to minimize these issues, by providing automation, control, and visibility tools to teams wherever they are.”
Imran Ghory, co-founder and partner at Blossom Capital commented: “Managing infrastructure has been a persistent pain point for fast-growing teams and the need for specialized management tool platforms has been underlined by the fact that so many teams are now working remotely.”
Spacelift’s competitors include HashiCorp (which raised $349.2M) and Scalr (raised $7.5M).
Since M-Pesa’s mobile money infrastructure came into play in 2007, there has been a proliferation of fintech services ranging from wallets to savings and loans. With this mobile money ecosystem growing in double-digits year-on-year, a lot of data is being created in the process. But this has left some fragmentation, where one person’s information is diverse and can be accessed via multiple channels.
For banks and financial institutions, it becomes difficult to understand and provide insights from users’ data. Over the past three years, some platforms have looked to solve this problem. They aggregate users’ financial data and share it with these financial players through APIs driving more data-driven insights and value-added products. One such platform is Pngme.
Today, the Africa-focused but U.S.-based unified financial data platform announced its seed round of $3 million. The investment, led by Radical Ventures, Raptor Group, Lateral Capital and EchoVC was closed in Q3 2020 and came after the fintech startup raised $500,000 in pre-seed two years ago. It further reflects the continued customer growth from banks, fintechs, credit bureaus and microfinance banks in Ghana, Kenya and Nigeria.
Founded by Brendan Playford and Cate Rung, Pngme started primarily as a lending platform in 2018. Playford, who grew up in the U.K., came to East Africa in 2007 to work on philanthropic biofield projects. He ended up writing short-term loans to entrepreneurs, particularly in Kenya and Tanzania, and during this time formed the basis for which he as CEO and Rung as COO founded Pngme.
“That was sort of the impetus we needed and also the experience of being credit invisible in the U.K. led Cate and me to found the company specifically focusing on providing access to finance to Africans,” he said to TechCrunch.
According to Rung, the company’s initial thesis was that entrepreneurs didn’t get enough help, capital-wise. But going into 2019, when the company raised its pre-seed round, the founders realized another problem — the lack of data infrastructure to access risk when giving out loans or capital.
Their stint in an accelerator based in Toronto, Canada helped to better understand the more valuable version of the company — the B2C layer which connects entrepreneurs with finance or the data infrastructure layer to understand risk or a person’s financial identity.
“We were building two different companies at once, so we had to choose one path. We realised that the data infrastructure layer was critical and a massive pain point in most of sub-Saharan Africa,” the COO added.
Pngme had to make a swift pivot to the latter. Building this would have a much more significant impact. Being able to aggregate mobile money transactions, bank transactions, loan data, behavioural data, process all that data into a structured format and make it available as an open API to developers, fintechs or banks across the continent will provide data to power real-time credit and new financial products.
Additionally, the company found out in the course of building that consumers want to understand their finances more. This helps to navigate their way to financial wellness using credit and, later, more sophisticated products. On the other hand, financial institutions need the data to know what customer segments to expand to or increase their bottom line. Therefore, placing emphasis on the customers’ needs is one of the company’s core value propositions.
“We’re hyper-focused on providing the highest real-time data coverage on credit-invisible customers, something that no other API is offering in our markets,” said Playford regarding the company’s consumer-centric play.
Image Credits: Pngme
Some of Pngme’s customers include SimpleFi, Pavelon, ReadyCash, CashTopUp and Rigo Microfinance. In addition to this, the CEO says the company will integrate with large institutional banks next month.
Despite similarities to other API fintech startups in the region with Plaid-esque functionalities, Playford says Pngme intends to be different from the billion-dollar company.
For one, its focus on traditional channels like USSD data — which has the highest financial coverage on the continent — attests to that. “We’ve gone a step beyond just providing rails to actually building on top of the data. We also provide machine learning insights for our customers,” Rung said.
Also, the platform’s SDK collects user-permissioned data through a partner’s existing app using a one-click data-sharing feature. This data is served up through an easy to integrate API that delivers real-time financial data and alerts. With 300% month-on-month growth in the fourth quarter of 2020, Pngme forecasts the number of user-permissioned data profiles created on its platform to reach hundreds of thousands and millions by 2022.
Pngme’s revenue model is subscription and API-call driven. The platform has different tiers; developers can get a set number of free API calls with no subscription with the free tier. With the enterprise tier for banks and fintech, API calls are charged and can be discounted in some instances. Besides that, the company has a white-glove onboarding process where Playford says developers and startups can reach out to build specific use cases on the platform.
Since raising its pre-seed round, Pngme has been in stealth mode, working with a close group of customers. But with this seed round, the company is going full tilt. According to Pngme, the investment is being used to grow its Lagos and Nairobi teams, particularly the engineers and data scientists, and scaling its product for banks, mobile money operators and fintechs.
Lateral Capital, one of the investors in this round, also backs another API fintech startup in Mono. On the firm’s decision to invest in Pngme, managing partner, Rob Eloff said to TechCrunch that “over the past five years, we have seen a growing appreciation for the continent-wide challenge of providing accurate relational data for financial services customers across Africa. In Pngme, we are fortunate to have met a team with a unique solution to the root cause of financial exclusion in Africa, and a unique culture that spans the best of Africa and the U.S.”
For EchoVC Partners, a Lagos-based early-stage VC, it’s the remarkable job the Pngme team has done in building and delivering a unified financial data API platform for credit identity and access. This is according to Damilola Thompson, the VP and associate general counsel at the firm.
At the moment, Pngme is processing millions in data points per month. With that scale, Rung hopes it will lead to the creation of new technology and more sophisticated financial products.
“What I think is most exciting is the way mobile money leapfrogged any sort of traditional financial infrastructure. Similar to that is how we’re seeing open banking in the U.S. give way to so many new financial products for the end consumer. I hope that by providing forward-thinking open API layers, the same can happen in Africa.”
Northmill Bank, the Sweden-based challenger that has around 200,000 customers across three European countries, has raised around $30 million in new funding.
Leading the round is M2 Asset Management, the Swedish investment company controlled by Rutger Arnhult, and asset management firm Coeli. The injection of cash will be used for continued geographical expansion and to accelerate the development of new products. Notably, this will include plans to launch in 10 new markets as Northmill aims to step on the gas. Next stop, Norway.
As it stands, 2006-founded Northmill is available in Sweden, Norway and Finland, where it competes with incumbent banks with physical branches and the likes of Lunar, Revolut and Klarna (which operates as a bank in its home country of Sweden, and Germany).
More adjacent, another competitor is Anyfin, which is similar to Northmill’s “Reduce” product, which promises to help customers consolidate their existing loans/credit and lower their interest payments. “Our fastest-growing product and main driver today is Reduce, which lowers people’s interest on existing credits, part-payments and credit cards,” explains a Northmill spokesperson.
Founded nearly 15 years ago and originally operating as a credit provider, in 2019 Northmill secured a full banking license, regulated by the Swedish Financial Supervisory Authority. The bank employs 150 people and offers savings, credits, payments and insurances. More generally, it has taken a different and slower path than most of the newer crop of challengers in Europe, relying less on investment to fuel its growth and claims to have been profitable from nearly the get-go.
Cue statement from Rutger Arnhult, chairman of the board of M2 Assets Management: “Northmill Bank is already a profitable company with a proven and sustainable business model, which stands out among today’s tech investments. We have been following their journey for a while and have been impressed by the founders, as well as the company. The banking market is well on its way to change and the winners will be those who best can adapt to the new digital reality. For me, this is an investment in a tech company with long-term owners, who are just at the beginning of their journey. I see great growth potential in the bank.”
Source: https://techcrunch.com/2021/02/10/sweden-based-digital-bank-northmill-raises-30m/
