A fantastic February for tech startups in Africa

From M&A and strategic minority investments to the opportunity in financial infrastructure to the race to onboard users to web3, here's what happened across the African startup ecosystem in Feb 2022

Afridigest provides ideas & analysis for startup founders, operators, and investors across Africa and beyond. 

This article explores key trends and developments in the African tech space in February 2022.

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After a dazzling January debut that saw Africa-focused tech startups raise over $430M from roughly 60 announced deals, fundraising in February was similarly feverish. The shortest month of the year witnessed approximately 60 announced tech deals across the continent comprising ~$600M in disclosed funding, according to Afridigest's weekly tracking and methodology.¹

So far, Africa-focused startups are on pace to raise ~$6 billion in disclosed funding and over $7 billion in total funding this year — assuming disclosed funding stays at ~85% of total funding. (In 2021, according to VC firm Partech Partners, fully disclosed deals represented 85% of total funding.)

In terms of the number of deals, Nigeria led the way with 18, ~31% of the total number of deals announced in February across the continent. But these Nigerian deals represented ~57% of the ~$600 million raised in the month, thanks largely to Flutterwave's $250M Series D (the continent's second mega-round of 2022) — it alone accounted for ~42% of February’s total disclosed funding.

Regional spotlight

February saw a return to fundraising dominance for the ‘Big Four’ countries (i.e., Nigeria, South Africa, Kenya, and Egypt). Whereas there was quite a bit of geographic diversity in January with the Big Four then accounting for just ~50% of the debut month’s disclosed funding and ~75% of its deal count, Big Four countries in February accounted for a whopping 95% of the disclosed funding raised and ~86% of the deals announced in the month.

Sector breakout

Sector-wise, fintech unsurprisingly led the way again, attracting 52% of the disclosed funding in the month (up significantly from January’s 29%), followed by software’s 16% thanks largely to chat commerce software provider Clickatell’s $91M Series C.

The top five sectors attracting funding in the month were fintech, software, e-commerce, healthtech, and mobility. And rounding out the top 10 were logistics, connectivity, crypto, proptech, and insurtech.

Trends and developments

While fintech overall continues to be ascendant, developments in February emphasized one broad theme in the sector:

• There’s still a massive opportunity in financial infrastructure. In 2020, I wrote in ‘The hierarchy of venture opportunities in emerging markets’ that “in an ecosystem, the prepotent layer is infrastructure … [and] there generally remain robust opportunities to create ventures that introduce basic or alternative infrastructure that can underpin the entire ecosystem.” This still rings true today, and February brought with it a strong reminder of the opportunity in building fintech infrastructure across the continent.

  
  Nigeria’s Flutterwave is now the most valuable startup in Africa thanks largely to its initial focus on & success in building payments infrastructure; other payments infrastructure providers like Nigeria’s TeamApt and Kenya’s Ubawa raised rounds in the month; Egypt’s MoneyHash raised a pre-seed to build payments orchestration infrastructure that integrates and sits on top of payment providers like Flutterwave; South Africa’s Stitch and Kenya’s CredRails raised rounds to build open finance API infrastructure; and CrowdForce raised a round to grow its last-mile financial services distribution infrastructure.

  

While it’s hard not to lead with fintech given its dominance in February, perhaps it’s a well-worn theme for regular readers at this point. That said, February also saw interesting, fresh developments relative to strategic acquisitions and investments across the continent:

• M&A in African tech is heating up. At the start of the year, I put forth that an increase in strategic bolt-on & tuck-in acquisitions is among five major trends to expect across Africa's startup ecosystem in 2022. And thanks to a very acquisitive February, this now seems prescient; at least eight acquisitions were announced in February alone. (This trend also continues into March with an additional three acquisitions already announced so far, just days into the new month.)

  

• Strategic minority investments are on the rise. Coupled with the upsurge in outright and majority acquisitions, February also saw an increasing number of companies take strategic minority positions in various startups (in Egypt mostly, but elsewhere too).
  
  Egyptian non-bank consumer finance provider Contact Financial invested $9M in Egyptian shopping browser Wasla to help it deploy BNPL offerings, Egypt’s Brimore invested $5M in its logistics spinoff Milezmore, the UAE’s super app (& Uber subsidiary) Careem took a stake in Egyptian food delivery platform Elmenus to gain more exposure to a strategic vertical in a high-potential market, and Mauritian survey-focused gig economy platform Rwazi invested in Mauritian HR tech platform KrediblePro which helps it source talent.

  

Switching gears and looking back to the article, ‘Key trends & themes to look for across Africa in 2022,’ I offered there that “2022 could see the rise of crypto/blockchain/web3 projects deployed across the African continent as it increasingly becomes the global center of utility-driven ‘web3.’” And February brought good tidings for web3 in Africa:

• The race to onboard African users to web3 is on. In early February, Nigeria’s Nestcoin, a builder, operator, and investor in web3 applications (in the mold of the US’s Digital Currency Group) raised a sizeable pre-seed backed by a mix of globally-recognized web3 VC firms and local investors in order to accelerate crypto and web3 adoption in Africa.

  
  And later on in the month, the Democratic Republic of Congo’s Jambo Technology raised a seed round of its own backed by Tiger Global, Coinbase, & other names that the global crypto community would easily recognize in order to build the “web3 onboarding portal of Africa.”
  
  Also in the month, Canza Finance raised a seed round for its DeFi neobank play that acts as a crypto on/off-ramp, enabling a variety of services including staking, P2P transfers, and cross-border settlements. (And notably, this trend has continued at least through the first few days of March, with just-announced fundraises from crypto exchange VALR and airtime-based crypto onramp Fonbnk.)

  
  See also: The most exciting applications of cryptocurrency & blockchain in the African context

While the crypto or ‘web3’ sector heats up, other sectors worth watching include healthtech, foodtech, ‘vehicle tech,’ and logistics.

• Healthtech is warming up. In my piece on the Africa tech trends to watch for this year, the fourth prediction began: “2022 could see significant developments in non-fintech sectors like healthtech.” So far, so good in February as the month saw the $40M Series B of Nigerian health insurance & telemedicine platform Reliance Health, Kenyan digital health record & healthcare management platform Afya Rekod’s seed round, Nigerian health (and job loss) insurance platform Casava’s pre-seed, and Nigerian pharmacy-focused procurement & management platform Remedial Health’s pre-seed + acceptance into Y Combinators W22 batch. Watch this space.

• Foodtech is experiencing a renaissance of sorts. January saw Orda, a Nigerian restaurant management platform, raise a pre-seed round to build digital infrastructure for restaurants. And the momentum in the sector carried over to February with fundraises from Egyptian B2B restaurant supply chain platform OneOrder, Egyptian B2B cold-chain logistics & agri-goods storage platform Freshsource, Nigerian food delivery platform HeyFood (also a participant in Y Combinator’s W22 batch), Kenyan tech-enabled B2B food distribution & logistics platform Kwanza Tukule, and Egyptian food delivery platform Elmenus’ strategic investment from Careem.
  
  It’s still the early stages of foodtech in Africa but entrepreneurs and investors seem to increasingly see a sizeable opportunity here. Everybody's gotta eat after all.

• Vehicle access and maintenance are attracting increased attention. February saw fundraises from: Nigerian mobility platform MAX, which is increasingly focused on providing access to low emission vehicles via collateral-free subscription packages; Kenyan electric mobility startup Basigo, which provides locally assembled mass transit electric buses; Nigerian vehicle management platform Mecho Autotech, which offers vehicle insurance & maintenance subscription packages; South African digital vehicle identity platform CarScan; and Tunisian automotive claims digitization platform Avidea.
  
  Mobility is an everyday need and in the African context, there are a number of challenges from generally poor public transport infrastructure to low vehicle affordability to the ubiquity of older, barely roadworthy vehicles ‘dumped’ across African markets to a lack of trust & transparency in various processes (from purchase to insurance claims) & more. It’s with this lens that one should view the traction and variety of approaches within the continent’s ‘vehicle tech‘ sector.

• There’s still lots of love for logistics. In addition to fintech, tech-enabled logistics has been among the sectors receiving significant investor attention in recent years — trucking logistics to be more specific.
  
  From the 2019 $30 million Series A of Nigeria’s Kobo360 ($20M equity / $10M debt) to the 2019 $23 million Series A of Egypt & MENA-focused Trukker to the purported $20-$30 million Series A of Kenya’s Lori Systems in 2019 to the 2020 $20 million Series B of Kenya’s Sendy to the 2021 $42 million Series A of Egypt’s Trella ($30M equity / $12M debt), there’s been a lot that investors have loved when it comes to logistics.
  
  This love was kept alive in February with fundraises from Kenyan trucking logistics platform Amitruck, Egyptian instant delivery & quick-commerce specialist logistics platform Yalla Fel Sekka, Egyptian cloud fulfillment, last-mile delivery, & customizable operations platform Milezmore, and Moroccan logistics management platform Freterium.

Final word

All in all, it was a fantastic February across Africa’s startup ecosystem that bodes well for 2022 & beyond. And early returns in March, including recent fundraises from M-KOPA and VALR, suggest that the pace won’t slow anytime soon.

While an increasingly common refrain is that there's too much focus across the ecosystem on fundraising news & figures, one thing it allows for is connecting dots, synthesizing and contextualizing new developments, and sense-making — an example of which is presented here. Worth paying attention to is not (just) the numbers, but the narratives as well.

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AUTHOR’S NOTE

If you haven’t seen it, January’s recap is available here. And if you’re interested in African tech generally, or as a current or aspiring founder/funder/operator, I’d love to chat. Feel free to reach out to me: Whatsapp, Twitter DM, Email.

As always, thanks for reading 🙌🏽
— Emeka

1. A note on the methodology used: unannounced and rumored deals are excluded; startups participating in Y Combinator and the SOSV MOX accelerator were deemed to have raised $500K and $150K respectively; grant funding is excluded; the value of ‘in-kind services’ like the $1M in non-cash contributions Kouncel received is excluded; 100% debt rounds like the financing facility provided to Moove by NBK Capital are excluded; deals from less traditional sources of capital like WeFunder or GetEquity are generally excluded; for standardization, the date of the first public fundraising media announcement or press release is used to indicate the month of the deal; fundraises from what we term ‘Africa-adjacent’ companies that may have significant operations on the continent are excluded/included on a case-by-case basis; and due to a tech focus, startups like Kenya’s Mr. Green Africa that are arguably different in kind (i.e., less tech-enabled) are excluded.