It looks like 2016 was a better year than previously imagined for African startups. An earlier report by Disrupt Africa on investment raised by African startups last year suggested there was a dip in funding on the continent down from 2015. But data from a new report by Partech Ventures, a San Francisco-based venture capital firm suggests otherwise.
Partech’s report says there was an uptick in startup investment on the continent. In 2016, the report says, African startups raised $366.8 million—much higher than the $129 million reported by Disrupt Africa.
The disparity between Disrupt Africa and Partech’s findings can be explained. Cyril Collon, general partner at Partech Ventures says the figures differ due to differences in methodology. Also critical, Collon says, is how both reports define an African startup. “We do include all startups that have Africa as their primary focus,” Collon said.
Partech’s definition, Collon says, “includes foreign startups” founded by non-Africans and possibly incorporated outside Africa but have been set up to operate primarily on the continent. As an example, Collons says an “overwhelming share” of the $134 million raised by off-grid tech startups went to companies incorporated outside the continent.
Like Disrupt Africa’s, Partech’s report shows startups receiving the most funding are still mainly concentrated across three countries: Nigeria, Kenya and South Africa. The three countries, put together, account for more deals, in terms of number and value, than the rest of the continent.
Comparatively, despite the increased investment on the continent, there’s been a lack of profitable exits by investors. Regardless, Collon says the continent will remain an investment hotbed given its long-term potential. “Our driving thesis is that it is smart to bet on African startups solving fundamental emerging market issues.”
“African startups are already leading on some innovations that address needs for all emerging markets.” One of those critical needs is power which is being solved by a number of renewable energy startups including M-Kopa in Kenya and Arnergy in Nigeria.
