African startups raised $2.1 billion in funding in 2019 according to a new report by the Baobab Insights. This is great news and nearly similar to earlier reports covering startup financing on the continent.
The team at Baobab Insights team said it tracked the findings from $253 million USD across 80 deals in 2019 and $283 million USD across 90 deals excluding debt financing, grants and prizes.
According to the team, 2020 started strongly, with funding exceeded Q1 2019 both in terms of the number of deals and the total amount invested across Africa.
The report indicates that although it is still early in Q2, the impact of measures taken to control the coronavirus (COVID-19) outbreak are beginning to become clear. Investment into East African technology companies has totalled $63.974 million USD in 2020 Year to date. While this total was taken prior to 20th May 2020, by comparison the total funding secured in Q1 and Q2 2019 by East African technology companies totalled $362.642 million USD.
Long term trend indicates that founders require an increased number of funding rounds to get to Series A stage.
“As part of our report on the regional investment landscape in East Africa, our Nairobi-based insights team looked at the average number of funding rounds required prior to securing Series A investment,” announced the team.
The Series A stage of funding is sought as founders navigate from early conception stage, in which a product is tested in the market, to a growth stage in which a company has broadly achieved product-to-market fit.
Since 2015 the average age of a company securing a Series A stage in East Africa has grown from 2.7 years to 6.3 years. The average for a company based in Africa over the same period has grown from 2.4 years to 4.9 years.
While it is still early days, this longer-term trend appears not to indicate that founders in East Africa are taking longer to achieve product-to-market fit.
A tough time for tech founders in East Africa?
It is too early to understand the long-term impact the COVID-19 pandemic will have on businesses and technology companies in East Africa, however the short-term dip in funding means that founders need to do more with less, at least for the short-term.
“The impact of COVID-19 on business across the globe is severe, and East Africa is no exception. For some tech founders the implications mean that they have to shift their focus from getting enough funding to grow, to getting enough funding to potentially survive the lockdown. However, as investors and founders find new ways to adapt to the implications of lockdown we should hopefully see a return”,Maria Inziani, Data Scientist, Baobab Insights
