Here’s why the African start-up scene is booming

There was an almost four-fold increase in total startup funding received for African startups in 2018. The number of funding deals more than doubled and startups on the continent are increasingly being recipient of big ticket rounds of over $5 million. In total, African startups raised a record $725.6 million across 458 deals, the 2018 venture investment report by WeeTracker shows.

The larger size of individual funding rounds is illustrated in the top ten deals which jointly accrue to $457 million and accounted for 61% of total funding received. It reflects increasing investor confidence in startup businesses across the continent’s major hubs. It’s a noteworthy trend given how in the recent past the abundance of early stage funding was typically not followed up with the crucial Series A growth stage.

In total, 30 startups raised individual rounds higher than $5 million in 32 deals valued at $626.9 million.

There’s a direct link between larger ticket rounds and “the number of funds that have larger capital allocations and can write larger ticket sizes,” says Yele Bademosi, managing partner at Microtraction, the early stage investment fund that was also the most active investor in 2018 per WeeTracker’s report. But just as crucial, he argues, is the increasing number of companies maturing to a level of growth that justifies the bigger ticket rounds.

“Like any market, it’s driven by supply and demand,” says Bademosi. Data backs up the sentiment: WeeTracker’s report shows 25 Africa-focused funds—a mix of institutional investors, venture capital, grants and prizes—launched last year with a total capital pool of just over $1 billion.

WeeTracker’s is the first funding report for 2018 released so far. But as other reports start to come in, there’s a possibility that funding totals might differ given varying methodologies. For its part, WeeTracker’s analysis includes companies that received investment for expansion or deployment in Africa, regardless of where they are headquartered.

It’s likely, however, that there will be similar themes across these funding reports. In line with previous years, Nigeria, South Africa and Kenya—the continent’s most advanced and valuable tech ecosystems—continue to dominate as the continent’s leading investment destinations while the hot streak of fintech companies across the continent will likely be reflected.

Fintech startups received the most investment in Africa in 2018, WeeTracker’s report shows. Across 93 deals, fintech accounted for 40% of total funding raised and also accounted for five of the top ten largest deals.