The rapid rise of Africa's tech industry: The number of startups and deals is on an upward trajectory in the African tech sector, fuelled by increasing demand for services in the world's fastest growing mobile market.

Author:Dzimwasha, Taku
Position::SPECIAL REPORT: IT & TELECOMS
 
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When Katlego Maphai, CEO of financial technology firm Yoco, returned from the US with the idea of launching a mobile payments startup, he was aware of the daunting task that lay ahead.

The South African point-of-sale startup, which began operating in 2015, not only launched its service in a market dominated by several major banks renowned for their innovations including First National Bank (FNB), but faced stiff competition in raising funding because of the small pool of fundraisers operating in Africa. At the time that Yoco raised its seed capital, African tech firms raised a total of $277m.

Initially, the company focused primarily on fundraising through friends, families and angel investors, but as the company grew apace--adding around 200 merchants per month--it raised further rounds of funding from venture capital (VC) firms, culminating in a Series B round of funding led by US-headquartered VC firm Partech totalling $16m in September 2018.

"With our Series A, we were able to prove that there was capacity and predictability in this business to scale, and then through that funding, we reached market leadership position," says Carl Wazen, Yoco's chief business officer. "So when it came to raising our Series B, we had a pretty strong story, and that narrative and the many relationships we nurtured during our previous fundraising rounds, allowed us to make that successful close with two very strong fintech focused VCs with a US, Dutch and African presence."

The other VCs for the second round included investment vehicle Orange Digital Ventures, the Dutch development bank FMO, and Quona Capital and Velocity Capital.

Yoco's successful fundraising is part of a wider surge in startup investment in Africa, which jumped year-on-year by 53% in 2017 to reach a record-breaking $560m by 124 startups, according to global investment firm Partech Ventures. Partech's data only includes deals higher than $200,000 and excludes any grant or debt deals, and "megadeals" worth $100m and over. The fintech and solar sectors secured 21% of the funding each, while e-commerce and educational technology startups accounted for 19% and 12% respectively. Nigeria, South Africa and Kenya accounted for 76% of the total investment, but this represented a 4% decline from the previous two years, reflecting the emergence of Ghana, Rwanda, Senegal and Uganda as attractive investment destinations.

The rapid rise of African tech is being fuelled mainly by demand for the services...

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