MIND THE GAP

Africa’s startup funding deals are entering the million-dollar era

Quartz africa
Quartz africa

The first decade of Africa’s tech startup funding has been led by angel and early-stage investors. Most of that funding was relatively modest: usually between $10,000 and $50,000. Still, it was enough to help entrepreneurs and local ecosystems get off the ground with limited infrastructure or market capacity.

Even after tech hubs and incubators began to proliferate around the big cities, six-figure deals were rare, and $1 million-plus deals a myth. But over the past 12 to 18 months, that has been changing.

Last year, venture capital funding in Africa topped $560 million, up 53% year on year, according to research by Partech. Some 124 startups participated in 128 funding rounds, compared with 77 rounds in 2016.

Finally, an almost regular flow of Series A fund deals are coming to fruition, as the biggest startup ecosystems move to the next stage of maturity. This week, TradeDepot, a Lagos-based software-as-a-service platform for FMCG distribution, banked $3 million in Series A funding led by Partech. In Nairobi, Africa’s Talking, a provider of access to telecom operators’ communication and payment APIs, raised $8.6 million in Series A funding led by IFC World Bank, Social Capital, and Orange Digital Ventures.

You can expect more deals of this size, historically an underserved gap in the market. While there have been options for seed funding ($50,000 to $500,000) and from private equity funds for much larger and more mature businesses ($10 million and above), there have been few options for funding between $1 million and $5 million, a crucial stage for young businesses looking to scale.

Investors appear to have listened. In January, Paris-based Partech launched an Africa Fund in Dakar with a target size of €100 million ($120 million). TLcom, a European VC, raised $40 million for its Tide Africa Fund last June, and last week led a $3.5 million round in mSurvey, a Nairobi-based mobile survey platform. Last month it led a $5 million round in Terragon, a Nigerian mobile marketing company.

Eric Osiakwan of Chanzo Capital says the market is ready to help startups get to the next stage. His firm is currently working on raising its largest fund to date: It’s anticipating funding rounds in the $1 million to $5 million range, if not higher. “For us the fund is not just about writing checks,” he says. “It’s about bringing smart capital to help management execute and scale up with our expertise and support.”

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