The African tech startup scene has been transformed in just four years

Even Obama is impressed.
Even Obama is impressed.
Image: AP Photo/Evan Vucci
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Last month DEMO Africa took place in Lagos, Nigeria, with 30 tech startups pitching to an audience of investors. The event—one of the biggest of its kind in Africa—is only its fourth year, but in that time the startup landscape has changed enormously.

Back in 2012, investing in the continent was still considered a risk, and there were few success stories to convince investors otherwise. But last year, startups listed on the online funding platform VC4Africa raised $26.9 million, more than double the amount in 2013. And that’s just a drop in the ocean; the total of venture capital invested was more likely closer to $500 million, considering sizeable funding rounds for the e-commerce companies Jumia, Konga and Takealot.

2015 has brought more big investments. (an online booking platform), Parcelninja (a logistics service) and M-KOPA Solar (which provides solar equipment to rural households, and accepts mobile payments) have raised large rounds, and Kenya’s Weza Tele (fintech) and South Africa’s WooThemes Africa (web design) are starting to see some impressive exits.

That will further encourage investment, according to South African angel investor Daniel Guasco. “Success breeds success,” he told Quartz. VC4Africa’s founder, Ben White, noted that the number of venture applications on VC4Africa has grown 640% in the last three years, and their overall quality has risen. With a billion people in Africa, a growing middle class, fast economic growth compared to much of the world, and the rapid expansion of both internet and mobile penetration, White argued there are many new market opportunities for these startups.

What’s more, those opportunities extend beyond Africa’s borders, argued Aaron Fu, managing partner for Africa at Nest, a Hong Kong-based VC firm. He cited SuperFluid, a Kenyan startup Nest is incubating, which uses non-traditional data sources to assess people’s financial health. “While this certainly was accelerated by a need on this continent for alternatives to traditional financial statements and credit bureaus, it has applications to individuals regardless of where in the world they reside,” he told Quartz.

An interesting aspect of the recent flurry of investments in African startups is that they come from a variety of sources. These range from angel investors such as Guasco and his fellow South African Vinny Lingham, to big mobile operators such as Millicom and Safaricom. Private equity firms from abroad, such as Helios Investment Partners, are now starting to target the continent, while investment networks are also in vogue, such as the African Business Angels Network (ABAN).

African governments are also doing more. Rwanda has created a special visa for technology entrepreneurs. Kenya has launched Enterprise Kenya, through which the government plans to back tech startups itself, and has revised its company acts, including one that has been in place since 1948. The Nigerian government, a strong supporter of DEMO Africa, has launched a publicly funded incubator in Lagos and plans to back startups itself.

Fu says African governments could go still further—for instance, by mirroring schemes such as Singapore’s Early Stage Venture Fund (ESVF), whereby the government provides matching funds for VC investment. The African opportunity is evident, and there is still a long way to go.