East African Startup ecosystem poised for massive growth in 2021

Africa has a very vibrant startup ecosystem. Even with the pandemic, these startups have gone ahead and raised massive funding to scale their products and services. 

In fact a recent report by AfricArena has revealed that venture capital funding for African startups will reach a record of $2.25 billion and $2.8 billion this year. While 2020 undersized its growth, due to the pandemic, the report noted that VC investment is expected to climb sharply and exceed $10 billion by 2025. 

Nigeria and Kenya are the hotspots for African VC investment, with $307 million and $305 million raised in 2020.

In the first half of 2021, Africa startups raised a whopping $1.19 billion in funding, with deals worth $1 million and above accounting for about 95% ($1.14 bn) of the total funding raised. This is according to another report released by Maxime Bayen, a Senior Venture Builder for Catalyst Fund at BFA Global. 

The report noted that South Africa and Nigeria were the top African countries with the highest startup funding in 2021, accounting for 28% and 27% of the total raised funds. Kenya, Egypt, and Ghana complete the Top5 (13%, 11% & 10% respectively). 

Nearly half (48%) of the funding raised in this fast half went to fintech start-ups. This is the same thing we are seeing in this second half with recent deals being Moove, an African mobility fintech company raising $23 million in Series A funding, Kenyan fintech startup Wapi Pay raising $2.2 Million in pre-seed funding, and Nigeria’s Lidya completing a $8.3 million pre-Series B funding round.

In East Africa, countries like Rwanda and Kenya have positioned themselves as top hubs in the region enjoying great success. In 2019 alone, startups in Rwanda raised $126 million. Unfortunately, the pandemic halted the country’s impressive progress and that figure plunged 91 percent to just $11.6 million last year.  Kenyan startups also defied the Covid-19 pandemic to record an increase in capital raising activities in 2020.

Challenges Facing startups in East Africa

Despite these sweet figures, startups in the region continue to face a lot of challenges. From changing consumer patterns to raising capital, startups in the region continue to find their way up.

Industry players are however proving a should for these startups to lean on. In May this year for example, Norwegian-based accelerator Pangea unveiled a scale-up program offering private funding of up to Ksh 300 million and business support for startups in Kenya.

“Out of the local start-ups that have raised more than $1 million, only 6% have local founders while the rest are founded by expatriates. As an accelerator, we are looking to change this narrative and enable more African entrepreneurs to gain access to the capital they need to move to the next level through programs like the Pangea Scaleup program”. said CEO and Cofounder of Pangea Accelerator Jonas Tesfu while announcing a call for applications for the program back in May.

Pangea launched its accelerator program in Kenya in 2018 and partnered with Strathmore University’s @iLabAfrica to link up Kenyan startups from across the industry with investors especially the African diaspora 

Garage48, through its hackathon series, has also been supporting local startups by matching startup co-founders, employers, and employees- a next-level networking experience, among other things. 

This week, Pangea, Garage48 with support from the Estonian Ministry of Foreign Affairs Development Cooperation Fund hosted a 2-day workshop to design solutions for challenges that the startups in the region are facing. Dubbed Empowering the Startup Community, the workshop hosted at least 25 representatives from incubation hubs, accelerators firms and other entrepreneur support organizations from among other countries Ethiopia, Kenya, Rwanda, Uganda, Somalia and Tanzania.

The idea of the workshop according to the CEO of Garage48 Mari Hanikat was to bring together different startup community ecosystem key players, create additional synergy between them and see how each of these organizations could contribute to the lifecycle of the East-Africa.

“Having this opportunity to cooperate with a leading East Africa ecosystem player is a big opportunity for us, specifically now that we need to focus on economic recovery from the effects of Covid 19. ‘’ CEO and Co-Founder of Pangea Accelerator Jonas Tesfu said n his keynote remarks at the workshop.

‘’Besides, it is exciting to partner with a key player in the Estonian ecosystem. Estonia is by far a global leader on e-governance and innovation, hence the need for us to learn from their experience”. He added.

Estonia is a small country in Eastern Europe, with a population of 1.3 million people and is well known for its flourishing startup ecosystem that is undergoing rapid growth. Companies like Skype, Monese, and Pipedrive all trace their growth to this country.  Bolt, which is behind a popular app centered around food delivery and ride-hailing is also Estonia-based.  The startup operates in 40-different countries, including Kenya. 

In 2021, East African startups will continue to thrive powered by improvements in digital infrastructure. By promoting and enabling a conducive environment for startups to get off the ground, the already booming tech ecosystem in the region is likely to flourish even further.

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