Out-Law / Your Daily Need-To-Know

Kenya among Africa’s ‘start-up hotspots’ as investments gather pace, says report

02 Apr 2015, 4:51 pm

Nigeria and Kenya are at the forefront of growing momentum for investment in start-ups in Africa, although South Africa is home to start-ups with the highest average investment of around $250,000 per project, new research has indicated.

According to the 2015 Venture Finance in Africa report by start-up funding platform Venture Capital for Africa (VC4Africa), the sum of all tracked investments in Kenyan start-ups in 2014 was $4.7 million, followed by South Africa ($2.8m), Uganda ($1.5m) and Nigeria ($1.4m).

Kenya was also just shy of matching the $250,000 average total investment per project recorded by South Africa, VC4Africa said. “The high sum of investments in Kenya corresponds with this country being considered one of Africa’s ‘start-up hotspots’.”

Out of 257 start-ups surveyed for the report, VC4Africa said “113 have been successful in raising capital according to the research”. All respondents were drawn from VC4Africa’s online community of entrepreneurs and investors, “therefore the research does not represent the total African investment space, but it certainly indicates key trends", VC4Africa said.

VC4Africa tracked investments in start-ups across Africa listed on its platform with a total amount of $27m. Out of the tracked investments, most were in Nigeria (24), followed by Kenya (19), Tanzania (12), South Africa (11), Ghana (10), Uganda (10), Cameroon (9) and Egypt (9).

VC4Africa co-founder Ben White said: “The research shows there are a growing number of businesses that are successfully growing their operations over time and adding much needed jobs to the African marketplace. This is a key message to investors. Now is the time to get involved in this space.”

The variety of start-ups featured in VC4Africa’s survey included a recycling firm, a social gaming platform, mobile payment firms and ‘smart tech’ innovators behind projects such as messaging and other apps.

According to data published in April 2014 by the World Bank, Africa’s 700 million mobile subscribers “use services that are provided locally, and they are also downloading more applications that are developed locally”.

A lead information and communications technology policy specialist with the World Bank, Tim Kelly said: “One of the main sources of locally developed applications is the technology hubs that are springing up across Africa... To our surprise, there are now around 90 tech hubs across the continent, and more than half of Africa economies have at least one.