Eleven $1 billion valuation startups have emerged in Africa in the previous six years, with five of them hailing from Nigeria.
Africa’s technological ecosystem is primed for exponential growth, according to a new analysis from Endeavor Nigeria titled “The Inflection Point: Africa’s Digital Economy Is Poised To Take Off,” which revealed this. Six of the eleven firms are fintechs, with the remaining five spanning education/talent, mobility and logistics, and digital commerce.
Jumia, Interswitch, Zipline, Fawry, Chipper, Andela, Swvl, Opay, Wave, and Flutterwave are among the companies included in the research. Jumia, Interswitch, Opay, Flutterwave, and Andela are Nigerian companies, whereas Fawry, Swvl, and Andela are Egyptian companies (Go1).
The majority of sales in Africa are in the $0.2-5 million range, with the $1 million to $5 million bracket rising at the fastest rate, with over 600 deals in this bracket compared to over 150 in higher brackets, according to the report.
“As a result, when these 600 companies ‘graduate,’ demand in the $5 million to $50 million range is expected to rise in the future years.” However, given the large decline in deal activity from $5 million and up, supply will most certainly fall short of demand. This creates a chance for investors in higher brackets, such as individuals with a net worth of more than $5 million,” the report stated.
The digital opportunity in Africa is big and expanding, according to the Endeavor Nigeria report. It predicted that the digital economy is about $115 billion, and that by 2050, it will be worth $712 billion, thanks to solid underlying fundamentals like COVID-19.
Investors are taking note, according to the report, as funding for digital startups expanded two times (2x) faster than worldwide rates between 2020 and 2021, and investors are becoming more active in Africa.
The growth in mega-rounds, liquidity events, and unicorns, according to the research, indicates that early investors are seeing established exit paths.
“However, there is still ‘white space’ to be considered by investors.” Due to the significant number of agreements in the $1 million to $5 million range (600) compared to the $5 million to $50 million range (150) in the previous year, it is unlikely that there would be enough supply in the market as companies in this area advance to greater ticket levels.
“Across Africa, there are numerous opportunities for digital disruption. Informality and fragmentation are prevalent in a lot of industries, restricting product and service availability and pricing. By constructing a ‘wedge’ and subsequently a ‘bridge,’ digital disruptors address this problem in a variety of industries, including finance, health, transportation, and others. A wedge is a product that answers a specific problem while also retaining customers. Then, entrepreneurs create a series of solutions that address the customer’s adjacent problems, effectively creating an ecosystem of solutions,” the report stated.
Investors interested in investing in Africa should evaluate the wealth of options available and be willing to modify their business strategies to take advantage of them, according to the research.
While Africa’s $115 billion digital economy is still in its infancy, it has 33% of its population utilizing the Internet, compared to 63 percent globally, and 41% of active broadband subscribers, compared to 83 percent globally.
According to the survey, 89 percent of Africans are covered by a mobile-cellular network, compared to 95 percent globally, and 83 percent of Africans have mobile-cellular phone subscriptions, compared to 110 percent globally. The region has 1% fixed broadband penetration, compared to 17% for the rest of the world.
Additionally, the report claims that the continent’s digital opportunity is concentrated in four countries: Nigeria, South Africa, Egypt, and Kenya, which together account for 32% of Africa’s population, 51% of the region’s mobile cellular subscriptions, 50% of Africa’s professional developers, 53% of Africa’s cities with over one million people, 51% of Africa’s GDP, and 73% of Africa’s accelerators.
Tosin Faniro-Dada, Managing Director/CEO of Endeavor Nigeria, stated that the data obtained in this analysis proves that Africa is the future technology boom frontier. She claims that a combination of factors, including our young and digitally knowledgeable population, rising digital penetration, and the impact of the COVID-19 epidemic on behavior, among others, has prompted a turning point in our digitalization journey.
This report, according to Faniro-Dada, is based on a variety of sources, including McKinsey & Company’s analysis.