Venture Capital Activity in Sub-Saharan Africa in 2017: Lessons Learned and Future Directions.

Venture capital activity in Sub-Saharan Africa in 2017 saw continued growth and evolution in the region’s startup ecosystem. While the challenges of political instability and regulatory hurdles persisted, there were also new opportunities emerging as investors and entrepreneurs alike looked beyond traditional sectors and borders. In this article, we reflect on the key lessons learned from venture capital activity in Sub-Saharan Africa during 2017 and how these insights can guide the future development of the region’s startup ecosystem. Venture capital activity in Sub-Saharan Africa in 2017

The year 2017 saw a continued growth in the region’s startup ecosystem, with a number of local and international investors increasing their investments in African startups. According to a report by Disrupt Africa, there was a total of $195 million invested across 159 deals in African startups in 2017. This represents a 51% increase in total funding and a 17% increase in the number of deals compared to 2016.

One notable trend in 2017 was the growing interest in non-traditional sectors, such as healthcare, education, and agriculture. These sectors have historically received less attention from investors, but the increasing demand for innovation in these areas is attracting more investment. For example, in 2017, Nigerian healthtech startup, LifeBank, raised $1.2 million in seed funding to expand its operations in Nigeria and Kenya. Similarly, Kenyan agritech startup, Twiga Foods, raised $10.3 million in Series A funding to expand its mobile-based supply chain platform.

Another notable trend was the increasing interest in cross-border investment and collaboration. Investors and startups alike are recognizing the potential of expanding beyond their home markets to access new customers, talent, and investment opportunities. For example, Nigerian fintech startup, Paystack, partnered with South African payment solutions provider, Yoco, to expand its payment processing services across Africa.

However, despite the overall growth in VC activity in Sub-Saharan Africa in 2017, there were still significant challenges facing the region’s startup ecosystem. Here are some of the key insights we gleaned from these challenges:

  1. Political instability and regulatory hurdles continued to pose challenges for startups. Despite some political stability and economic growth in some parts of Sub-Saharan Africa, political instability remained a challenge in other parts of the region. For example, the ongoing conflict in South Sudan, the political crisis in Zimbabwe, and the uncertainty surrounding the upcoming elections in Kenya all posed challenges for startups in those countries.

In addition, regulatory hurdles continued to be a major challenge for startups in Sub-Saharan Africa. In many cases, the lack of clear and consistent regulatory frameworks made it difficult for startups to navigate the legal and regulatory environment. This often resulted in delays in securing necessary licenses and approvals, which in turn affected the speed and efficiency of business operations.

  1. The funding gap for female-led startups persisted. Despite efforts to address the funding gap for female-led startups in Sub-Saharan Africa, the disparity between funding for male-led and female-led startups continued to persist in 2017. According to a report by Venture Capital for Africa (VC4A), only 16% of startups that received funding in 2017 had at least one female co-founder. This highlights the need for more concerted efforts to address the funding gap and promote gender diversity in the region’s startup ecosystem.
  2. The importance of impact investing and sustainable business models. As the region’s startup ecosystem continues to evolve, there is a growing recognition of the importance of impact investing and sustainable business models. Investors are increasingly looking for startups that are not only profitable but also have a positive social and environmental impact. This trend is reflected in the increasing number of social impact funds and sustainable investment initiatives that are emerging in Sub-Saharan Africa.

While the overall growth in VC activity is a positive sign for the region’s economic development, there are still significant challenges that need to be addressed in order to ensure that startups can thrive and succeed. As we look ahead to the future, there are several key lessons that we can take from the past year and use to guide our approach to the development of the region’s startup ecosystem.

First and foremost, there is a need for greater collaboration and partnership between investors, startups, and government entities. This includes initiatives to promote cross-border investment and support for startups to navigate the regulatory environment in different countries. By working together, we can help to create a more supportive and conducive environment for startups to grow and succeed.

Secondly, there is a need for greater investment in non-traditional sectors such as healthcare, education, and agriculture. These sectors have significant potential for innovation and impact, and can play an important role in driving economic growth and social development in the region. By supporting startups in these sectors, we can help to address some of the most pressing challenges facing Sub-Saharan Africa, such as access to healthcare, education, and food security.

Thirdly, we need to prioritize gender diversity and address the funding gap for female-led startups. This is not only a matter of social justice, but also an important economic imperative. Women-led businesses have been shown to generate higher revenues and profits, and investing in female-led startups can help to create more inclusive and sustainable economic growth in the region.

Finally, we need to prioritize impact investing and sustainable business models. As the world continues to grapple with the challenges of climate change, poverty, and inequality, there is an increasing recognition of the importance of investing in businesses that are not only profitable, but also have a positive social and environmental impact. By promoting sustainable and socially responsible investment, we can help to create a more equitable and sustainable future for Sub-Saharan Africa and the world.

It’s clear that venture capital activity in Sub-Saharan Africa during 2017 was a mixed bag of opportunities and challenges. While there is still much work to be done to address the political instability, regulatory hurdles, and funding disparities that continue to pose challenges for the region’s startup ecosystem, there is also cause for optimism. By learning from the lessons of the past year and working together to create a more supportive and inclusive environment for startups, we can help to build a brighter and more prosperous future for Sub-Saharan Africa and its people.

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Matthew is an entrepreneur and business Advisor with a passion for change management and social empowerment. With a background in business accounting and advisory, as well clinical research project management, he strives to find strategic and sustainable solutions to business problems.

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DAVE ROMERO

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