Digest Africa Launches the 2020 Index Report with Crunchbase

Digest Africa brings you another edition of our reports in the Digest Africa 2020 Index Report. The report features a breakdown of the startup and investor performance for the year 2020 with a detailed analysis of key market trends of the ever-changing African startup ecosystem. We partnered with Crunchbase to showcase Africa’s global position in securing funding. We also partnered with Nairobi-based research firm Vasights Data & Research to support analytics and design. Below is a summary of the report. 

Digest Africa Launches the 2020 Index Report cover

Startup investment growth YoY

COVID-19 took center stage on the African continent with a ripple effect on the economic and social construct, defining a new normal. This report therefore highlights the funding trends in response to the global crisis as African entrepreneurs strive to grow and stay relevant to improve lives and create opportunities on the continent. 

What started off as a promising year of startup investment growth, 2020 took an irresolute turn that the continent is still trying to recover from. Following our analysis on total disclosed funding from 2018 as $1.19 billion that grew to $1.8 billion in 2019 with a 51% YoY growth rate, it was anticipated that this would grow further in 2020. Leading up to 2020, VC funding had seen a 22% compound annual growth from 2016 to 2019.

African startup's YoY annual growth chart from 2016 to 2019

In 2020, there were a total of 481 funding rounds, of which 361 (74.7%) were disclosed representing $854.6M in total disclosed funding, excluding exits. This is a 28.2% drop in deal count and 52.5% drop in value compared to 2019. $660.7M of the total was venture capital raised across 462 deals. 

Despite this huge drop in the amount of funding and the tough fundraising and business environment, entrepreneurs and businesses with strong value propositions that are reacting to and solving Africa’s challenges continue to attract funding. As a response to the effects of Covid-19, we witnessed the emergence of many startup initiatives from several governments and varying parastatals, and impact investors, among others that set up funds to support many small businesses.

Based on Crunchbase data, the venture funding raised by African startups still represents less than 1% of global venture funding. In spite of the tremendous growth over the years prior to COVID-19, the gap in funding to African startups is still great. There remains a lot of work to be done to raise awareness and shine a light on entrepreneurs with valuable business models that are addressing societal problems in Africa.

Tracking investments through the lens of gender, the percentage of funding raised by startups with at least one woman on the founding team over the past four years has steadily ranged between 12% and 20% of the total capital raised that year. The year with the highest percent of funding to startups with at least one woman on the founding team was 2019 with 20.13% of the total funding. 

In 2020, $105.2 million was raised across 122 deals by startups founded by women, making up 14.53% of the total funding that year. This was a 56.7% drop in total funding compared to 2019, where female led or co-founded startups raised $243.3M across 129 deals.


Venture funding by African regions and countries

Out of the $660.7 million in disclosed venture funding raised in 2020, the West African region received the most funding with $236.8 million raised across 155 rounds. This made up 36.7% of the total venture funding raised on the continent. Amongst West African countries, Nigeria received the highest investment of capital at $159.9 million across 121 rounds with the financial services industry attracting most of this funding ($57.6 million across 25 deals).

Venture funding by African regions chart

Despite the COVID-19 slump, 10 countries have shown growth in disclosed venture funding relative to 2019. Ethiopia recorded a 9100% growth in disclosed funding from $25,000 in 2019 to  $2.3 million in 2020, followed by Rwanda with a 749% increase ($3.1 million in 2021 compared to $365,000 in 2019). Senegal also saw a 750% increase in funding from 2019 ($1M to $8.5M), Zambia saw 171.4% growth ( $1.4 million to $3.8 million), South Africa saw 126.6% growth ($67 million to $151.8 million), Ghana saw 126% growth ($28 million to $63.3 million) and Egypt saw 33.5% growth ($62.3 million to $83.2 million). Malawi, Morocco and Mozambique, all of which made no disclosed fundraises in 2019, also raised funding to the tune of $3.3 million, $10.1 million and $1.5 million in 2020 respectively.

Venture funding by African countries chart

Big exits for Africa in 2020

2020 saw some of the biggest exits on the continent. A total of 25 M&A deals were recorded in the year compared to 56 in 2019 with seven disclosed deals. In 2020, only five exits were disclosed representing a total collective value of $521 million. The largest exit was the $288 million acquisition of DPO Group by Network International. The majority of the acquired companies are based in Nigeria (6) and South Africa (5), and belong to the financial services industry (5 acquisitions).

$850 million was raised by nine tech-focused funds in various ‘close’ stages, the largest being the Accion Quona Inclusion Fund managed by GP Accion with investment from Quona Capital and other undisclosed LPs. Y Combinator was the most active investor of the year, investing in 17 funding rounds that earned startups a combined total of $3.9 million in disclosed funding.

To access the full report free of charge, subscribe to any of our annual packages on our website. For customized data and analytics, or to share with us a press release or fundraise, reach out to us at info@digestafrica.com.

Cover photo by Clodagh Da Paixao on Unsplash.

  • Originally published July 8, 2021, updated April 26, 2023