On the 30th of November 2021, the Tony Blair Institute for Global Change convened a panel discussion in partnership with Ventures Platform on closing the funding gap for African tech startups. The panel brought together some of the leading voices in tech startup funding in Africa including Rebecca Enonchong, Co-founder and Board Member, of the African Business Angel Network; Odunayo Eweniyi, Co-founder and COO of Piggyvest; Aissatou Djiba Diallo, Senior Fintech Advisor at Ecobank.
Africa’s tech startup funding landscape has witnessed a tremendous growth in value and volume in the past decade. Between 2015 and 2020 African Startups saw funding growth 6x higher than the global average. Recent reports show that African startups have received an estimated $ 4.9 billion in funding in 2021, a 2.5x increase from the amount raised in 2020. While funding for startups is growing, Africa still accounts for less than 0.2% of the value of the global tech ecosystems and the gap with other regions is increasing. The gap between Latin America - the second least funded region - and Africa nearly tripled between 2020 and 2021.
Africa is the most entrepreneurial continent, with an estimated 22% of its working age population starting businesses, and over 10 million people entering the job market each year. Already leading the world in FinTech, Africa has the potential to be a tech startup superpower However, cumbersome regulations, limited funding and highly fragmented markets are holding startups back from realising this potential.
We asked our panelists how they saw the future of the African tech startup ecosystem, and what needs to change for Africa to become a tech startup superpower. They were highly optimistic - all the panelists are seeing “beautiful things”, noting the “(funding) trajectory is just incredible”. They shared seven key things they’d like to see change:
Change the narrative and increase visibility of tech startups in Africa. The story of African tech startups on the global stage should capture the innovation, creativity and vibrancy of the ecosystem. There are many startups that are doing great work in the continent, but they lack visibility within the global investor community. More success stories of African tech startups need to be told to get more investors to believe in African entrepreneurs and invest in their startups. The narrative should reflect the enormous potential in the use of innovation to solve Africa’s biggest challenges.
Invest in women and more diverse teams. Recent data shows that female founders and female-only founding teams received less than 1% of the total raised by startups in Africa in 2021. Panelists called strongly for more funding to go to women founders and more diverse teams in the tech startup funding landscape. They highlighted the need to have women represented on both sides of the table - as founders as well as fund managers.
More participation of Africans and African sources of funding in the tech ecosystem. Panelists highlighted the need to have more Africans - locally and in the diaspora - participate in funding. They called for more support to local investors, giving them tools and skills to invest in startups locally, as they better understand the local context, and the unique challenges that Africa faces. Rebecca Enonchong asked, “when there's an exit, there's a lot of money, where does it go? Does it come back into the African ecosystem? Or does it go to Silicon Valley”.
Diversified investors at each stage of the startup lifecycle including investment from government and pension funds. Governments and pension funds in the continent need to trust the local VCs and invest, so they can support local tech startups.
Governments need to move faster, be more inclusive and coherent in their policies. Regulation will always play catchup to innovation. Governments need to act faster, working with innovators to build regulations that enable rather than stifle innovation. Panelists emphasised the need for more dialogue between governments and stakeholders within the local tech ecosystem, so that the policies address the needs of the ecosystem. There was a call for more coherent government strategies, so that measures aiming to support startups are not undermined by other government policies.
AfCTA's free market area presents a huge opportunity - startups need to think big. Startups need to think beyond their countries and target the whole region as a market. The potential free trade area for Africa will give an advantage for startups in terms of bypassing some of the regulation and allow them to reach more markets across the continent.
Don’t hold African startups to a different standard. Failure is characteristic of the startup industry. The success rate of startups in Silicon Valley is 5%, and African startups should not be expected to vastly exceed this. African startups need to be able to experiment, fail and start again. This is the pivotal role that hubs in Africa need to continue to play, they need to be capacitated with skills, knowledge, and resources to support startups and help them become sustainable and successful. They also noted that African startups are often expected by investors to have a specific social good function, where startups elsewhere in the world are not held to this standard.
Huge thanks to our excellent panelists for an engaging and enriching discussion, and to Ventures Platform for hosting this event with us. If you missed the event, you can play it back here. Our roadmap for governments on Fostering Tech Ecosystems capturing many of these lessons will launch in February.