Funding for Africa's startups is at a record high - this is where it's going

AfricArena has released a new report using Partech data which has forecast that venture capital funding for African startups will amount to between $2.25 billion and $2.8 billion this year, a record high for the continent. Africa's VC investments reached an all-time high in 2019 when 234 tech companies raised $2.02 billion in 250 equity rounds, a 74 percent increase on the $1,163 recorded in 2018.

While the pandemic resulted in major setbacks in 2020 with growth declining 29 percent, the good news is that major improvements are expected. In 2022, VC investment is expected to climb sharply to between $3.8 billion and $4.7 billion while the upper range is expected to be $6.8 billion by 2023. By 2025, VC investment in Africa is forecast to exceed $10 billion.

This is thanks to a number of factors such as an increased allocation of capital from corporates to their corporate VC activities, acquisitions of African tech companies, intensified FDIs and major initiatives from Europe such as the Enrich in Africa program. So given that African startups are on the upward trajectory, where is activity most heavily concentrated?

Currently, Nigeria and Kenya are the hotspots for African VC investment with $307 million and $305 million raised in 2020, respectively. Egypt is also a major player with $269 million of funding recorded last year while South Africa had $259 million. Rwanda has positioned itself as a hub for East Africa and it enjoyed great success with $126 million raised in 2019. Unfortunately the pandemic halted its impressive progress and that figure tumbled 91 percent to just $11.6 million last year.