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US-Based VCs: Placing Social Focus Before Financial Goals In Africa

The average funding values ranged between $100 – $500k in exchange for between 5 – 7%. equity. How did African Startups build this level of trust in a short decade?

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For decades, Venture Capitalists from across the pacific ocean have helped improve the Startup culture in Africa through investing into businesses within their areas of interest while scepticism and lack of conviction for businesses in the emerging markets remains a cause for concern.

Some other noticeable concerns have been around the regulatory risks, market size, regional stability and maybe some increased oversight costs of running operations 9,000 miles away from the business region. All of these mitigates foreign investments for startups.

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In the early 2010s, only a few investors were attracted to Africa and the honest reason for this attraction back then was for quick profits/ scalping. But today, with the introduction of major funding initiatives by Development Finance Institutions such as International Finance Organization (IFC), Oversea Private Investment Corporation (OPIC) and Acumen, we are seeing a significant and steady transformation in the investment scene as investors are going all in and taking a huge stake in African businesses.

We can say technology in Africa has had a major hand in repositioning the investors’ mindset and in turn triggering this transition. Startups have raised a record $725.6M in 2018 and $1.34B just last year.

In research to characterise the role of US-based VC firms in the startup ecosystem in Africa, analysis on the data available from funding startups in the continent within 30 months, did show that about 51 transactions were led by US VCs.

Between 2018 and 2020, major funding deals have been dealt on a co-investment basis between VC firms and investment Houses. Findings show that US-based firms have been involved in 42 co-investments to the tune of $243m in just over 730 days. About 2.7% of the investors were solo investors while AHL Ventures, AC ventures, Deciens Capital and Ben Franklin Technology Partners hold huge chunks of the investments.

Speaking about regions which have benefited from fundings, North-Africa records the larger deals with 24 investment rounds led by 500 startups and Endure capital, east African is the next recipient of the with 13  deals, West Africa has received 10 deals and South Africa has received the least number of funding deals.

Taking a look at which industries benefited the most, the Finance industry recorded major funding for fintech based products. The fintech industry received about $77B worth of investments and startups in Logistics and Supply Chain was the next highest funded with 9 deals raising over $51.9m. Startups in Healthcare and eCommerce followed closely with $51m and $15.7m worth of deals.

The average funding values ranged between $100 – 500k in exchange for between 5 – 7%. equity.

Since startups in Africa began solving challenges and promoting innovation and the development of the continent, we have consistently attracted US-based VC firms which have placed social focus before financial goals. 

This is great news for the continent. The opportunities will continue to rise so long as we keep at building better economic reforms, regulations and an encouraging startup ecosystem.


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