In 10 years, $20 billion have been invested on the continent, 68% of it in the last 3 years. While 2023 saw a general slowdown in startup funding worldwide, from which the African continent was not spared, growing economies, technology penetration and an increasingly seasoned talent pool make Africa a strategic terrain for investors over the long term.

Africa, an attractive continent in which to invest

In the global tech landscape, Africa is increasingly positioning itself as an attractive investment destination. In less than a decade, the region’s annual financing in venture capital (VC, an investment by one or more investors, usually a minority stake, in the capital of unlisted startups)  has risen from $2 billion in 2019 to $5 billion in 2022. Despite this growth, the amounts invested remain modest compared to the continent’s population (1.3 billion people).

To meet the challenges of the future, exacerbated by strong demographic pressure (the population is expected to reach 2 billion by 2050), major social and economic challenges such as unemployment and limited access to public services (health and education), the Africa needs to establish appropriate reforms. For some of us, technological progress, as a driver of financial inclusion, access to health, education, and other essential services, is key to initiating sustainable societal and economic transformation.

This transformation could occur quickly, since despite its young age, the African VC is structuring very quickly, as Isadora Bigourdan, former Managing Director of Digital Africa, points out. What’s more, activity is supported by the arrival of new players whose intention is to financially support startups from seed through to series A+, i.e. over several years. The emergence of start-ups in Africa is also made possible by the proliferation of technology hubs. There are some 600 of them on the continent, and three of them are already driving technological progress: Nigeria, Kenya and South Africa. Within these hubs, numerous start-ups, incubators, techno parks and flourishing innovation centers form the economic fabric of the future.

Tech and the venture capital market in Africa: a societal and environmental opportunity

The rise of the African VC has been driven by the need to address the continent’s major socio-economic challenges, with the financial sector at the forefront, with significant gaps in terms of access and inclusion. Khaled Ben Jilani, Senior Partner and member of AfricInvest’s Executive Committee, points out that « less than 25% of Africans have access to credit, and less than 50% have a formal bank account ». The opportunity to accelerate digital and financial inclusion on the continent is being seized by fintechs such as Djamo, an Ivorian startup specializing in online banking services and backed by several VC funds.

Meanwhile, Fatoumata Ba, Founder and Executive Chairman of Janngo capital, points out that technology offers a considerable opportunity for job creation. Key sectors include mobile access, Wi-Fi deployment and the strengthening of technological infrastructures. By investing in these areas, Africa could boost its economic growth while offering employment opportunities to its expanding population.

For his part, Khaled Ben Jilani, Senior Partner and member of AfricInvest’s Executive Committee, highlights the strong international development potential of African startups: they can replicate their business models in several regions of Africa. « This is particularly the case for startups in the tech sector, which place societal and environmental issues at the heart of their projects, and which often aim to expand across the entire continent ».

Local realities across the continent place climate change and inclusion at the heart of the issues. As a committed player, Janngo stands out for its active support of young female entrepreneurs.

Tech and the venture capital market in Africa: a financial opportunity

With a population of over one billion and a substantial talent pool, Africa represents a significant financial opportunity, especially as the African venture capital market is young. The African tech ecosystem is evolving rapidly, with dazzling success stories thanks to investors and startup studios. These include Expensya, a nugget specializing in the digitization of expense management, and InstaDeep, a Tunisian startup specializing in artificial intelligence, which has developed an alert system for Covid-19 variants, in collaboration with BioNTech. The startup has since raised 88 million euros from BioNTech, Google and others.

Finally, Ben Marrel, CEO and co-founder of Breega, emphasize that Africa’s success in meeting the challenges of the future depends on technological innovation. Indeed, given the stark contrast between Europe and Africa, illustrated by diametrically opposed demographic trajectories (aging vs. demographic explosion), it seems that traditional technologies from abroad will not solve the continent’s future problems. This is why Breega, after four funds dedicated to European startups, launched its first African vehicle in 2023: Breega Africa Seed I.

What are the keys to sustainable success for African tech?

Understand African markets and build trustworthy relationships
In order to enable the growth and development of startups in Africa, several foundations are essential. According to Isadora Bigourdan, ex-Director General of Digital Africa, it is necessary to acquire in-depth, informed knowledge of the African market, breaking down all the myths and prejudices that can distort outside perceptions, and offering a grounded perspective of the reality on the ground. Another cornerstone is to establish a trustworthy relationship within these fast-growing ecosystems. To this end, the creation of platforms connect startups with investors is proving to be an effective approach, as it gives them direct access to a network of investors and strengthens mutual trust. By way of example, Bpifrance’s EuroQuity platform is designed to meet this need for efficient, targeted « matchmaking » between entrepreneurs in the fund-raising phase and investors.

Create an ecosystem supported by local players and investors
The establishment of a local venture capital value chain is essential. As Fatoumata Ba, Founder and Executive Chairman of Janngo capital, points out, Foreign Direct Investment in Africa currently represent around 6% of the continent’s GDP, while African assets invested outside Africa amount to 26% of GDP. To counter this situation, it is essential to promote initiatives that encourage local players to invest (e.g. pension funds), such as the Egyptian central bank, which encourages national banks to invest in local private equity.

Encourage investment and raise awareness of venture capital funds
For Khaled Ben Jilani, in addition to Development Finance Institutions such as Proparco, there is a need to create more funds of funds (portfolios whose performance is linked to underlying individual funds) dedicated to the continent. Like Bpifrance’s Averroès program, these are making a major contribution to structuring and sustaining African management companies.

In addition to traditional direct investments, we need to support entrepreneurs with innovative approaches to overcoming short-term liquidity challenges, such as « bridge » financing (short-term financing requested by a company to finance an urgent cash-flow requirement) that emerged in response to the Covid-19 crisis.

Fatoumata Ba stresses the need to accelerate investments in underserved markets such as French-speaking Africa. To achieve this, it is important to improve risk perception on the continent by popularizing information on the performance and risks of VC funds. Not all African funds appear in international benchmarks such as Cambridge Associates (a benchmark of global fund performance), which hinders knowledge of the performance of these asset classes in Africa.

Lastly, Ben Marrel, CEO, and co-founder of Breega, argues that it is important to encourage investors, major lenders, insurers, and pension funds to invest in real-impact projects in Africa, notably by relaxing certain limitations on investing outside OECD countries. It is also crucial to implement measures aimed at mitigating the risks associated with investments in Africa and optimizing the performance of African funds: the introduction of first-loss financial guarantee mechanisms is a relevant approach to achieving this objective.

In conclusion, the African VC was born to support the emergence of innovative technologies, which are themselves intended to provide answers to urgent local needs: health, financial inclusion, agri-food sovereignty, and so on. Thus, the promising nature of all African startups (Healthtech, Fintech, Agrotech, Edtech, etc.) and the technological innovations they enable to emerge constitute very fertile ground for VC investments, both from the point of view of financial profitability and that of societal impact, which must always go hand in hand for the Africa’s sustainable development.

Isabelle Bébéar  – Director – Head of International & European Affairs
Elodie Doussa – Senior Investment Director – Averroès Africa – African Funds of Funds Department

1. African venture capital fund targeting startups using technology to address the continent’s challenges.
2. AFD Group’s 130 million euro program to support startups in the digital sector.
3. Venture capital management company dedicated to financing tech startups in Europe and Africa.
4. A pioneer of private equity in Africa, AfricInvest has raised over €2 billion and made more than 200 investments in 35 African countries