The African startup economy is growing faster than the global economy.
Last year, various African startups celebrated wins displayed in dollar signs. There was a slew of high-performing investment rounds which included uLesson ($15M), Metro Africa Xpress Inc. ($31M), and MFS Africa ($100M). We could certainly go on but those numbers are proof that African startups are growing at a rate we have not seen before.
According to a LinkedIn posting by Founders Factory Africa’s Accelerator Lead Nicole Dunn, it was said that African startups raised $1 million every two hours in 2021 with a total of $4.9 billion invested in African startups.
Now more than ever, investments are soaring in Africa. Here is why.
More Trust In Startups Globally
The global startup economy has already witnessed improving numbers dating back to 2018. According to a LinkedIn report, India welcomed eight unicorns in 2018 and already that number has climbed to 42. China housed 91 unicorns in 2016, after taking five years between 2010-2015 to score five. Latin America generated $14.8 billion and 17 unicorns in 2021.
As investors witness more startups globally reach billion-dollar status, it appears they were ready to turn their heads toward Africa. Prior, investors questioned the return on their investment and feared African startups would not have the potential to acquire the lucrative unicorn status.
“For a long time, investors were hesitant to put money into early-stage startups in Africa. Political and macroeconomic concerns acknowledged, there was no assurance that Africa could produce billion-dollar businesses, and that investors taking on early-stage risk would get their money out,” Dunn wrote via LinkedIn. “To believe in unicorns, most investors need to see unicorns. By the end of 2020, there were enough mega-deals to instill confidence that the venture capital model could work on the continent.”
Now, Dunn says African startups are reaping increasing benefits accompanied by a renewed confidence in their economy. Investors are swarming to Africa with their eyes on startups in the early stages of gaining momentum. The influx of new funding alongside the competitive market is causing an uptick in seed-stage valuation and due diligence timelines.
African Founders Contributing To Bolstering Economy
Investors aren’t the only face leading Africa’s booming growth. African founders are also taking a leap of faith by stepping away from traditional job routes to pursue entrepreneurship. Furthermore, as founders gain experience and find their footing in the market, they are networking with seasoned industry professionals and operating as advisors or investors for startups to follow.
With Proper Measures, African Startups Will Continue To Prosper
Despite Africa’s gleaming promise, Dunn noted that there should be provisions in place to maintain its current momentum. More talent will need to enter the marketplace, as many startups are facing difficulties due to the need for technical skills exceeding human availability.
“With demand for technical skills currently exceeding supply, many early-stage startups cannot afford to hire the people they need, or team leads are quickly poached by multinationals and well-funded scale-ups,” Dunn wrote. “To avoid stunting growth, public and private sector actors must focus on building a robust talent pipeline, and platforms are needed to make cross-country hiring more feasible.”
She concluded: “Investors must develop the networks and capabilities to support portfolio talent acquisition and retention, and help founders nurture junior talent into senior leadership. Without this, momentum will slow, and wealth will continue to exit the continent to global experts and development houses.”
And, she left one last piece of advice for founders:
“As long as founders remain focused on solving real problems and creating real value, they will continue to push the boundaries of what is possible for startup investment and scale in Africa. Onwards.”