Venture Capital Activity in Sub-Saharan Africa in 2018: A Reflection on the Vibrant and Diverse Year

Venture capital activity in Sub-Saharan Africa in 2018 saw continued growth and diversification of the region’s startup ecosystem. According to the African Private Equity and Venture Capital Association (AVCA), the region saw a total of 139 venture capital deals worth a combined $1.1 billion in 2018, a 300% increase from just five years prior. This growth is a positive sign for the region’s economic development, but it also highlights the need for continued focus on building a supportive and conducive environment for startups to thrive. In this blog post, we will explore some of the key trends and lessons from venture capital activity in Sub-Saharan Africa during 2018, and discuss how we can use these insights to drive continued growth and impact in the years ahead.Venture Capital Activity in Sub-Saharan Africa in 2018

One of the most notable trends in venture capital activity in Sub-Saharan Africa during 2018 was the increasing diversity of sectors and industries being targeted by investors. It was a year when year on year funding raised by businesses on the continent doubled from that raised in 2017, as a total of US$ 1.163 Billion raised in equity funding.

While traditional sectors such as fintech and e-commerce continued to attract significant investment, there was also growing interest in sectors such as healthcare, education, and agriculture. This trend is particularly notable given the significant social and economic challenges facing the region in these sectors, and the potential for startups to drive meaningful impact and change.

One example of this trend is the Nigerian healthcare startup, LifeBank, which raised $6 million in a Series A funding round in 2018. LifeBank uses technology to improve access to blood and other medical products in Nigeria, addressing a critical gap in the country’s healthcare system. Similarly, the Kenyan education startup, Eneza Education, raised $1.4 million in a funding round in 2018, which will be used to expand its mobile-based education platform across the continent.

Another notable trend in venture capital activity in Sub-Saharan Africa during 2018 was the increasing importance of impact investing and sustainable business models. This reflects a broader global trend towards investing in businesses that not only generate profits, but also have a positive social and environmental impact. In Sub-Saharan Africa, where many countries are grappling with significant social and economic challenges, impact investing has the potential to drive meaningful change and promote more sustainable and equitable economic growth.

One example of this trend is the Ghanaian social enterprise, AgroCenta, which raised $650,000 in a funding round in 2018. AgroCenta connects smallholder farmers with buyers and provides them with access to financing and other support services, helping to improve their livelihoods and promote sustainable agriculture in the region. Another example is the Kenyan solar energy startup, M-KOPA, which raised $80 million in a funding round in 2018. M-KOPA provides affordable solar energy solutions to off-grid households, helping to address the region’s significant energy access challenges while also promoting sustainable and environmentally friendly energy practices.

Despite these positive trends, there are also significant challenges facing the region’s startup ecosystem. One of the most pressing challenges is the funding gap for early-stage startups, which can struggle to access the capital and resources needed to grow and scale. According to a report by the Global Entrepreneurship Monitor, only 7% of adults in Sub-Saharan Africa have started a new business in the past three years, compared to a global average of 14%. This highlights the need for greater investment in early-stage startups and support for entrepreneurship more broadly.

Another challenge facing the region’s startup ecosystem is the political and regulatory environment. Many countries in Sub-Saharan Africa continue to struggle with political instability and corruption, which can make it difficult for startups to operate and attract investment. In addition, regulatory hurdles and bureaucratic inefficiencies can make it difficult for startups to navigate the business environment, particularly in sectors such as healthcare and finance.

Finally, there is a need for greater collaboration and partnership between stakeholders in the region’s startup ecosystem. This includes collaboration between startups, investors, governments, and other key players in the ecosystem, as well as collaboration between different countries and regions in the continent. By working together, stakeholders can help to address some of the challenges facing the region’s startup ecosystem, and drive greater impact and growth.

In terms of specific strategies and initiatives that can help to address these challenges and drive greater impact in the region’s startup ecosystem, there are several key areas to focus on. One important strategy is to promote greater access to finance and support for early-stage startups. This can include initiatives such as seed funding programs, angel investor networks, and incubators and accelerators that provide mentoring and resources to startups.

Another important strategy is to promote greater collaboration and partnership between stakeholders in the ecosystem. This can include initiatives such as startup bootcamps, hackathons, and other events that bring together startups, investors, and other key players in the ecosystem. By promoting greater collaboration and knowledge sharing, stakeholders can help to address some of the key challenges facing the region’s startup ecosystem, and drive greater impact and growth.

In addition, there is a need to promote greater regulatory and policy support for startups, particularly in sectors such as healthcare, finance, and education. This can include initiatives such as regulatory sandboxes, which provide a safe space for startups to test and innovate new products and services, as well as policy support for initiatives such as telemedicine and mobile banking.

Finally, there is a need for greater education and awareness around entrepreneurship and the startup ecosystem in Sub-Saharan Africa. This can include initiatives such as entrepreneurship education programs in schools and universities, as well as public awareness campaigns that promote the importance of entrepreneurship and the positive impact that startups can have on the region’s social and economic development.

As we reflect on venture capital activity in Sub-Saharan Africa during 2018, it is clear that the region’s startup ecosystem is continuing to grow and diversify, and that there is significant potential for startups to drive meaningful impact and change. However, there are also significant challenges facing the ecosystem, including the funding gap for early-stage startups, the political and regulatory environment, and the need for greater collaboration and partnership between stakeholders.

Moving forward, it will be important for stakeholders in the ecosystem to focus on strategies and initiatives that can help to address these challenges and drive greater impact and growth. By promoting greater access to finance and support for early-stage startups, promoting greater collaboration and partnership between stakeholders, promoting greater regulatory and policy support for startups, and promoting greater education and awareness around entrepreneurship and the startup ecosystem, we can build a more supportive and conducive environment for startups to thrive in Sub-Saharan Africa, and drive positive social and economic change across the continent.

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