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NEW REPORT: Funds Raised By African Tech Startups in 2018 Surpass Some Countries GDP

May 18, 2019

Tech startups in Africa are having a field day. In fact, the amount raised through funding, by tech startups in Africa is two and a half times larger than the GDP of Sao Tome and Principe, an island nation off the coast of Central Africa.

The Afrobytes and Viva Tech conferences in Paris this week are providing an opportunity to analyse the growth of tech startups in Africa. Fund-raising is one of the key growth areas. Partech Africa, a venture capital firm, hinted that 146 startups in 19 African countries raised $1.16 billion for African digital entrepreneurs in 2018.

Image result for Tech funding Africa 2018

Key Analysis

Kenya, Nigeria and South Africa in all saw a 78% of the total funding, with Egypt close behind.

French speaking countries are not way behind:Senegal is the leading tech ecosystem among them with a total of $22 million raised in four deals so far.

Forty Senegalese startups last November secured a total of $2 million in government funding alone.

Side by side with their Anglophone peers, African Francophone countries, Partech noted, operate in smaller markets, and lack capital and mentors.

With African population expected to reach 1.4 billion by 2021, and with over 1 billion smartphones on the continent, Africa looks like the a promising center for the world’s leading high-tech and telecom companies.

What Speakers At Both Conferences Said

Marieme Diop, a venture capital investor at Orange Digital Ventures, said that ‘unfortunately in Francophone Africa, it is not in our DNA. People who succeed in business or in electing positions do not necessarily reach back to help their peers to show them how to be successful. In the Anglophone world, it is a must for anyone who wants to start something: seeking advice. So the gap is not only financial’ between the regions. Africa is seen by many as the next frontier for venture capital, with its booming population and mobile-first economy. That’s why Google, Facebook and PayPal participated in Paris in Afrobytes 2019.’

We do not want people globally to see African high-tech as an exotic stuff,’ said Afrobytes CEO Ammin Youssouf. ‘We want to be heard and talk about AI, blockchain, what is happening in Silicon Valley, because it has an impact on us. We already have brilliant minds in Africa, especially in tech, to have those conversations.’Unlike the global trend, where men dominate the high-tech industry, women are leading the movement in Africa.’

Women Are Becoming A Large Part of the Tech Revolution

Ben White, chief executive officer of venture capital platform VC4Africa, who has been supporting startups on the continent for more than 10 years analysed this situation:

‘‘Actually, what we see in the statistics is that women’s involvement and participation on in the African continent is much higher than what you would find in New York, for example, or San Francisco. I think it is an advantage. It also means having women investors who are very sensitive to gender-related questions and can also ensure that the system we are building is inclusive.’’

Can Government Help Tech Startups By Way Of Funding?

Government in startups? That is a two-way risk:

Kenza Lahlou, co-founder and managing partner at Outlierz Ventures, said the public sector ‘should not invest [in startups].To him, governments simply don’t have the skills needed to pick good investments. However, government can bring support by way of legislation, and policy support.

Morocco, for instance, already has InnovInvest, which it is doing in partnership with the World Bank to invest in local venture capitalist funds, to lower the risk for local funds.

Charles Rapulu Udoh

Charles Rapulu Udoh, a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organisations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution and data analytics both in Nigeria and across the world.

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New Report: Blockchain Among The Fastest Growing Startup Areas In The World At A Growth Rate Of 101.5%

May 10, 2019

The Genome Group has just released its 2019 edition of the global startup ecosystem performance. The fastest growing startup sectors were listed as:

Advanced Manufacturing & Robotics, which grew to a five year high of 107.9% and accounts for about 1.8% of the share of global startups.
Blockchain, which grew to a five year high of 101.5% and accounts for about 2.7% of the share of global startups.
Agtech & New Food which also saw a five year growth rate of 88.8% and also accounts for 0.8% of the share of global startups
AI, Big Data, & Analytics, which saw a five year growth of 64.5% and has a highest growing share of global startups of 7.1%.

Below Are Key Insights From The Report

The Fastest Growing Startup Areas

The average growth of Advanced Manufacturing and Robotics,Blockchain, Agtech & New Food, and AI, Big Data & Analytics over the last five years is 90.7% while their average exit success over the same period is 110.5%.

Among Growth-Phase sub-sectors AI, Big Data, & Analytics is the largest one, comprising 7.1% of all global startups. It is also the sub-sector that is growing the slowest among its Growth-Phase peers.

Nonetheless, if we separate AI by itself, excluding Big Data & Analytics startups from the cohort, we see that a standalone AI-sub-sector is growing about twice as fast as the AI, Big Data, & Analytics sub-sector as a whole.

*Genome Startup Ecosystem Report

Startup Areas That Are Fully Mature, Although Their Growth Is Slow

The four startup sub-sectors in the Mature Phase are :

Cybersecurity — with an 87.3% growth rate over the last five years and 0.9% share of global startups;
Cleantech — with a 26.2% growth rate over the last five years and 2.9% share of global startups;
Life Sciences — with a 15.0% growth rate over the last five years and 2.6% share of global startups;
Fintech — with an 105.8% growth rate over the last five years and 8.7% share of global startups;

Reasons:

These mature startup areas collectively still grew a respectable 15.9% in early-stage funding and 58.6% in exits during the past five years.

While this level of growth is sufficient to make them mature in terms of startup sub-sectors, these are figures most traditional industries would be envious of.

Fintech, an important startup sub-sector, shows two major signs of approaching a successful late Maturity: first, it has grown massively, and now nearly one of every 10 global startups is working in this sub-sector.

Second, it still shows very strong performance and growth in terms of exits. This shows that while not as much money is coming for early-stage startups (later stage and mega rounds are another story), founders and investors are able to still exit in impressive numbers.

Interestingly, Life Sciences and Cybersecurity are the only two startup
sub-sectors in the Mature Phase that have grown in the latest period. This could be a sign of renewed vigor for startups in these spaces.

*Genome Startup Ecosystem Report

Four Startup Areas Are Fast Declining

They are:

Edtech (educational technology)— with an early stage deal concluded by the startup sector declining by 15.8%, the sector still maintains a share of global startups of 3.1%;
Digital Media —with an early stage deal concluded by the startup sector declining by 38.9%, the sector still maintains a share of global startups of 20.7% ;
Gaming — with an early stage deal concluded by the startup sector declining by 40.4%, the sector still maintains a share of global startups of 4.5%;
Adtech ( advertising technology) — with an early stage deal concluded by the startup sector declining by 47.9%, the sector still maintains a share of global startups of 4.2% ;

Reasons:

Sub-sectors in the Decline Phase are shrinking in terms of early-stage funding deals, although mega rounds and later funding rounds might still be happening. In addition, each one of them is still experiencing growth in exits, although they are under-performing the typical startup sub-sector.

The main change to this group since last year when we published the Global Startup Ecosystem Report in 2018 is in Edtech — a sub-sector that was in Mature Phase that now has edged towards Decline Phase.
While exits Global Startup Ecosystem Report 2019 are still growing, early-stage funding deals — a key indicator of future potential from both founders and investors — are declining. While these sub-sectors are declining overall, they still have meaningful presence and size, and can be renewed by new technologies — for example with the potential for Virtual Reality and Augmented Reality to rejuvenate Gaming.

Why You Should Care About These Startup Areas and Their Performance

According to Startup Genome, these startup areas are the major part of their report for two main reasons:

1. It Will Enable Ecosystems Around The World To Focus on the Most Viable Startup Areas.

Identifying and building on local strengths is one of the main levers that policymakers and ecosystem builders can use to boost ecosystem performance. No small ecosystem can perform well and compete with places like Silicon Valley, London, Beijing, or New York across the board. But what they can do is be a hub of excellence in specific startup sub-sectors and use that advantage to build spillover effects that improve the ecosystem and the economy as a whole.

Take San Diego, the #3 ecosystem in the world for Life Sciences even though it is relatively small with only 1,000 to 1,400 tech startups — less than 10% the size of Silicon Valley and only 14% of the size of New York. That strength spilled over and helped San Diego become a top 30 global startup ecosystem despite its small size.

Frankfurt is a similar case. Although it is small, with only 300 to 500 startups, it is incredibly focused on Fintech. It has many Fintech accelerators and corporate startup innovation initiatives, about half of the VC funding in the ecosystem goes to the sub-sector, and the city is home to a very strong traditional financial industry with five Forbes 2000 companies in finance and the presence of the European Central Bank headquarters. That focus led to the largest German Fintech exit of all time taking place in the city (360T, for nearly $800 million) and high ecosystem performance across many Success Factors.

2.The Findings On These Startup Areas Would Provide Insights for Startup Founders

As a founder, knowing how your startup sub-sector of interest is growing — and which ecosystems have the biggest competitive advantage in them — can help you make better decisions. It tells you the places you should be considering networking or opening operations at (e.g., if you are Life Sciences founder in Europe, you would do well to make connections in London and Lausanne-Bern-Geneva) and it tells you about the funding and exit environment (e.g., if you need capital for a Gaming startup not overlapping with growth startup sub-sectors, be prepared for a tough funding environment and consider more bootstrapping).

Charles Rapulu Udoh

Charles Rapulu Udoh a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organisations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution and data analytics both in Nigeria and across the world.

New Survey Report Shows Manufacturing Rate In Nigeria Is On Increase

April 27, 2019

A new PMI Survey Report shows a better performance for the Nigerian Manufacturing Sector in April. This is for the 25th consecutive time in a row. The PMI Survey Report is contained in a report released by Central Bank of Nigeria (CBN) for the month of April 2019. The report shows the manufacturing sector in Nigeria improved more during the period under review.

Key Analysis From The Figures:

The report shows expansion in the manufacturing sector for the twenty-fifth consecutive month and at the quickest rate since January.

Faster Rises Were Seen As:

Production output (increased to 58.8 from 58.3 in March),
Total new orders (increased to 57.2 from 56.7),
Employment in the manufacturing sector (increased to 57.0 from 56.9);
Raw materials available to manufacturing companies (increased to 57.5 from 57.1).

The Red Light:

The report shows that fewer export orders were made, as total export order fell more deeply (to 37.4 from 47.9)
Inflation also hit input prices for most factories as input price inflation accelerated (to 60.2 from 57.6)
Total stocks of finished goods went up at a slower pace (to54.4 from 60.7).
Inflation, however, lessened on output charge for most factories (to 52.4 from 62.3)
Overall, Manufacturing PMI in Nigeria averaged 51.70 from 2014 until 2019, reaching an all time high of 61.10 in December of 2018 and a record low of 41.90 in June of 2016.

Growing Sectors:

All the 17 sub-sectors surveyed recorded growth. Among others are management of companies; real estate rental & leasing; construction; wholesale/retail trade; agriculture; health care & social assistance; finance & insurance; professional, scientific, & technical services and educational services.

What Rising PMI Means For Every Economy:

International investors coming into every country usually study the PMI (Purchasing Managers’ Index) to determine the most current economic situation in the country.

PMI is usually the most closely observed business surveys in the world. It’s relied on by most countries’ central banks, including the US Federal Reserve, European Central Bank and Bank of England for providing the most accurate advance signals of changing economic growth and inflation.

Essentially, in predicting GDP growth, a sustained reading of higher than 42.0 PMI is considered to be the benchmark for economic expansion, while a sustained reading of below 42.0 could indicate that an economy is heading into a recession.

The Composite Manufacturing PMI measures the performance of the manufacturing sector and is derived from a survey of purchasing and supply executives from 13 locations in Nigeria. The survey shows the change, if any, in the current month compared with the previous month

Click here to download the full report.

Also See: Nigerian Bank of Agriculture is Open For New Investors

Charles Rapulu Udoh

Charles Rapulu Udoh a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organisations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution and data analytics both in Nigeria and across the world.