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There’s never been a better time to be an African startup looking for investment, with the amount of invested capital in the continent more than doubling from 2015.
At least that’s according to data from the 2016Venture Finance in Africa research, conducted by VC4Africa. The research, which saw the organisation collect data from 462 ventures from 41 African countries (see chart below) and 140 Africa-focused investors from 25 countries around the world, shows that US$73-million was invested in 224 ventures who took part in the survey. With an average investment of US$326 000, that’s significantly higher than US$27-million invested last year.
The VC4Africa ‘Venture Finance in Africa’ report captures the performance of early stage, high growth ventures from Africa and the activity of early stage investors. The insights are broken down across five indicators: job creation, financial performance, investments, early-stage investor activity and ecosystem.
Founders are doing it for themselves
Despite the apparent boom in African startup investment, investors are still a comparatively minor source of funding among the continent’s entrepreneurs. Most startups are still wholly founder-funded, with family and friends and competitions/grants both coming out higher than angel investment.
Top investment categories
The research shows top investment categories are related to the Technology sectors, and then followed by Agriculture, Health, Finance and Energy. The research also reveals that ventures that participate in sector events, or join an incubator or accelerator, are twice as more effective in securing capital for their venture. And of the investors part of the VC4Africa community 86% has invested in an African venture.
VC4Africa Research Lead Thomas van Halen was not surprised to see 86% of the participating investors have been investing in African startups, which is similar to last year’s results. “I was mainly intrigued to discover the high amount of new investors in the market with less than five investments. This implies they are building up their investment portfolios in the near future. One way to do this can be the formation of more -local- syndication opportunities.”
VC4Africa co-founder Ben White explains why this annual research is conducted: “Operating as a founder or investor without quality information hinders your ability to make informed decisions. A critical challenge for those venturing in Africa. At VC4Africa we are working hard to address this. The members have come together to establish a basic index that starts to put real numbers behind Africa’s growth story.”