CBInsights Global State of Venture 2021 Report is a comprehensive 273 page report with one glaring omission… Africa is not mentioned! (source here)

CBInsights 2021 ‘Global’ State of Venture Report Forgot Africa. …

Venture Funding in Africa this year was beyond expectations. So how do I stay up-to-date and start to wisely invest in African technology?

I love January.

Not because it is a cold, dry or virtuous month, but because it is a month full of reports that either tally last year’s right and wrong predictions; predict the coming year; or summarize-in-depth what happened, so that we can mitigate the risks of an uncertain future, plan a better year and invest in companies we feel will improve the world.

CBInsights Global State of Venture reports are in-depth accounts I am always eager to read, and this year’s annual report conveyed an overall positive reality, specifically:

• A record in global venture funding of $621 billion, more than double that of last year, half of it raised in the U.S.
• Over 1,500 mega deals (over $100 million) received 59% of total funding.
• Asia surpassed the U.S. for the first time in total deal count with nearly 12,500 transactions, most in China
• 517 new unicorns (up 69% from last year); and 44 decacorns (over $10 billion valuation)
• Over 10,000 mergers & acquisitions (58% increase year-over-year); $1.6 billion median special purpose acquisition company (SPAC) exit valuation (double that of traditional initial public offerings); and FinTech leading startup sector funding (21%)

Global health investments too, had a spectacular year (I mention it also here):

• $57.2 billion in investment (79% YoY) with close to 3,000 deals
• 13 new Unicorns (think Truepill, Maven, CityBlock, Hinge, Pear, Ginger)
• 574 M&As (think Oracle and Cerner; Microsoft and Nuance; Optum and Change Healthcare)
• 77 IPOs (like Doximity, Movano, Dialogue Health, Bright Health)
• 17 SPACs (23 and Me, Hims and Hers, Clover Health)

Unfortunately CBInsights’ 2021 comprehensive 273-page report had one glaring blind spot… they forgot to mention Africa! (source here)

The African continent is missing, despite the fact that it raised close to $5B, more than LATAM

I will not try to second guess CBInsights’ omission and instead I will:

• Share with you data about this year’s venture investing in Africa
• Emphasize the role of blockchain and cryptocurrencies in Africa (I also wrote about this here)
• Most importantly, suggest how to stay up-to-date and be part of the African tech-investment scene

#1: Venture Investment in Africa in 2021 surpassed all expectations

According to Briter Bridges and similar to global trends, last year was a bonanza year of growth for venture investment in Africa, specifically (below):

• $4.95 billion worth of total investment (up from $700 million in 2017 and double from 2020!)
• Top 20 mega ($100M+) deals or 4% of total deals, received 60% of all funding.
• Over 750 deals, 62% funded from the U.S., 8% in the U.K., 6% South Africa, 4% Canada and 20% from other countries
• Number of M&As doubled to 32
• 62% of all funding went to FinTech
• $2.8 billion worth of these investments came from new funds created after 2019
• Most active countries were Nigeria, South Africa, Kenya and Egypt (aka the “big four”)
• With currently six unicorns, the growth landscape has over 40 “soonicorns.”

You can find the report here

Despite this exponential growth and similar to the US, female-led and gender-diverse owned start-ups did not receive their fair-share of capital raise (below), or as Max Cuvellier, author of the report said “Crumbs, basically.”

Less than 1% of female led our female founding team were able to raise last year (source)

As mentioned, 2021 saw more and larger deals, indicating how much the startup scene has transformed. Specifically, FinTech dominated the capital raise market with incumbents such as Flutterwave, Tala, MFS and Tingo. With the increase of mobile phone usage and internet penetration, raises for FinTech startups are likely to continue and grow.

Furthermore, in addition to the acute need for financial inclusion — banking the underbanked is a strategic goal in Africa — a growing middle class is demanding to stop the increasing costs of remittances and money transfers (aka “lazy tax”), and alleviate the burden of sovereign debt, imposed by foreign banks like the International Monetary Fund.

Banking the unbanked, alleviating the cost of remittences and de-dollarizing the economy are key drivers for FinTech funding (here)

#2 The role of blockchain and cryptocurrencies in Africa

Despite the continent’s 3.5% average growth rate in 2021, supported by a rebound in commodity prices and a gradual easing of social restrictions, international banks and lenders are still concerned about virus flare-ups and low vaccination rates in Africa, much of it caused by the vaccine hoarding and waste of high- and middle-income countries.

Nonetheless, Africans continue to trust their markets and remain extremely optimistic about their economic future (below).

Africa’s young and vibrant population is most optimistic about the future (source)

This hopeful message, given Africa’s proven ability to weather much of the pandemic with innovation and resilience as shown in their successful response to COVID-19, is articulated clearly in the Foresight Africa 2021 Report, a well-thought-out post-pandemic recovery plan that includes:

• Investing in human capital, especially entrepreneurial young women
• Creating a self-sufficient, independent, resilient public health system
• Building local and national responses to climate mitigation and adaptation
• Implementing technological tools, including cryptocurrencies, to improve remittance systems, digital diplomacy and data governance for long-term socioeconomic gains
• continuing to cultivate Africa’s relationships with emerging partners, such as the Association of Southeast Asian Nations, China, Gulf States, Russia and others (including the U.S.)

Finally, Africa is the fastest-growing cryptocurrency market among developing economies and the third-fastest growing market in the world, despite its relative small size (below). Notably, Africans living abroad use digital currencies to send remittance payments back home and in fact, account for the highest fraction of retail crypto transfers, an indicator of crypto’s usage for remittances. (I wrote about this about El Salvador, here)

#3: How do I stay up-to-date?

The convergence of blockchain as an emerging technology, DeFi as an emerging business model, and Africa as an emerging market allows the region’s industry participants to test social impact strategies such as:

• Financial inclusion
• Supply chain solutions
• Identity for vulnerable populations
• Smart energy and environment ecosystems
• Human rights smart contacts
• Health and wellness platforms
• Education outreach

Nonetheless, for most of us, Africa remains far and unknown, and it is difficult to vet a company there, let alone decide if they are “investor-ready.”

This is why beyond publicly available reports, we at Impact Rooms created a dashboard that allows users an— in-a-glance — ability to estimate readiness, social impact and due diligence/verification (AML/KYC) of African technology-enabled companies (see below).

ImpactRoom’s ML engine uses signal and human intelligence to determine the readiness of a company. Gamification tools like AWS credits or tokens promote user and client engagement with the platform

Final thoughts:

Africa is going places.

It is full of young people eager to harness the latest decentralized innovations, not only to earn their livelihood using peer-to-peer fee-less transactions, or to de-dollarize and mitigate the risk of using fiat currency.

Africans are looking for boundless freedom, for Uhuru, and they should not be overlooked, but rather emulated.

The East African Rift, home of civilization, where hominid ancestors have been found, including “Lucy” (on my way to “Hells Gate” at Lake Naivasha, Nakuru, Kenya)

ImpactRooms is the first of its kind, Enterprise Escalator, that prepares African companies for growth and investment at all financial stages.

This content is for educational purposes only. It does not constitute trading advice. Past performance does not indicate future results. Do not invest more than you can afford to lose. The author of this article may hold assets mentioned in the piece.

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