Why Africa’s Startup Ecosystem Needs More Diversification in Funding
Posted: Thu Feb 13, 2025 3:42 am
Africa is often referred to as one of the largest untapped venture markets in the world. The continent has over 1.3 billion people, some of the world’s fastest-growing economies, and vast potential for tech innovations to serve its rapidly growing population. A good indicator of this potential is the fact that sub-Saharan Africa is the world’s fastest-growing mobile phone market. These prospects fuel increased interest in tech startups on the continent — the startup ecosystem raised $1.43 billion in 2020 compared to $366 million in 2016. The number of total equity rounds annually has also increased, from 55 in 2015 to 359 in 2020, across multiple sectors. However, most of this funding focuses on just a few sectors, like fintech and off-grid tech, and such concentration could create a bubble that prevents the continent from exploring its potential across other tech sectors.
Over the years, fintech has consistently attracted the most investments. Based on Partech‘s annual funding reports which began in 2015, between 2017 and 2020, fintech accounted for 30% of the yearly total equity funding to tech startups in Africa on average. Off-grid tech is another area that receives fairly consistent interest — it trailed behind fintech, but still averaged 15% of total funding in the same time period. However, investments in other sectors lag far behind those two, with edtech at 6% of total funding and entertainment at just 1.5% on average. Agritech only just emerged as a funded vertical in 2020 (prior to this, there was no disclosed equity funding to agritech in Africa), claiming 13% of the year’s total startup funding, while equity investments in martech only amounted to 1.4% and 0.7% respectively in 2018 and 2019. Yet despite their relatively low amounts of equity funding, each of these sectors holds great untapped japan whatsapp number data potential.
Unfortunately, without venture investments, businesses in these sectors remain limited, ill-equipped to drive the innovative experiments that will solve some of Africa’s most essential challenges at scale. For the startup ecosystem to thrive in Africa, a healthier strategy is needed — one in which investors consciously invest in diverse sectors. In 2020, Africa’s $1.43 billion in startup investments fell far short of India’s $10 billion (in a country with a similar population), and Southeast Asia’s $8.2 billion (in a region of about 650 million people). A look at startup investments in India and Southeast Asia — markets that are similar to Africa but more mature — shows more of this diversification across sectors. Their similarity to Africa in terms of population size and economic growth dynamics indicate that these markets could serve as models for the continent.
Over the years, fintech has consistently attracted the most investments. Based on Partech‘s annual funding reports which began in 2015, between 2017 and 2020, fintech accounted for 30% of the yearly total equity funding to tech startups in Africa on average. Off-grid tech is another area that receives fairly consistent interest — it trailed behind fintech, but still averaged 15% of total funding in the same time period. However, investments in other sectors lag far behind those two, with edtech at 6% of total funding and entertainment at just 1.5% on average. Agritech only just emerged as a funded vertical in 2020 (prior to this, there was no disclosed equity funding to agritech in Africa), claiming 13% of the year’s total startup funding, while equity investments in martech only amounted to 1.4% and 0.7% respectively in 2018 and 2019. Yet despite their relatively low amounts of equity funding, each of these sectors holds great untapped japan whatsapp number data potential.
Unfortunately, without venture investments, businesses in these sectors remain limited, ill-equipped to drive the innovative experiments that will solve some of Africa’s most essential challenges at scale. For the startup ecosystem to thrive in Africa, a healthier strategy is needed — one in which investors consciously invest in diverse sectors. In 2020, Africa’s $1.43 billion in startup investments fell far short of India’s $10 billion (in a country with a similar population), and Southeast Asia’s $8.2 billion (in a region of about 650 million people). A look at startup investments in India and Southeast Asia — markets that are similar to Africa but more mature — shows more of this diversification across sectors. Their similarity to Africa in terms of population size and economic growth dynamics indicate that these markets could serve as models for the continent.