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Things are looking good for the African startup space. We’ve already revealed how much established players, especially in the ecommerce space, have benefited from funding this year, but it looks like early stage companies haven’t done too badly.
At least that’s what research from entrepreneurial social network VC4Africa shows. The research, which comes from surveys of members of the VC4Africa community, shows that invested capital more than doubled compared to last year’s research: from US$12 million to US$26.9-million. And the average amount invested per venture increased from USD 130K last year to over USD 200K this year.
The research shows 49% of the ventures start generating revenue in their first year of operation. 44% of the ventures are successful in securing external capital investment. The top investment categories are related to the Technology sectors, and then followed by Agriculture, Health, Finance and Energy. It also reveals that ventures that participate in sector events, or join an incubator or accelerator, secure on average 23% more than their counterparts who do not participate in such programs. And of the 600 investors part of the VC4Africa community 82% invested in an African venture.
Three key trends from the research are a growing interest from African diaspora to invest in startups in their country of origin, the rise of local business professionals turned angel investor, and a growing appetite for cross-border investing in Africa generally.
The VC4Africa community reportedly has more than 17 000 members in 159 countries, including 600 investors. 2000 entrepreneurs in Africa present their companies on the platform: early stage ventures that require investments less than USD 1 million. Each venture is scalable, makes smart use of technology, or is disruptive in their application of a business model.
“From the research we know that entrepreneurs have been able to secure an increasing amount of venture funding compared to last year,” says VC4Africa Co-Founder Ben White.
He does however note that there remains a gap in funding structures on the continent: “Despite considerable gains the ‘missing middle’ finance problem persists (mid-level financing for early stage growth entrepreneurs), although narrower than when VC4Africa started in 2007.”
The community does note that its data sets do not represent the total African investment space, but does suggest that it indicates key trends, especially in a space which traditionally doesn’t receive all that much attention.