Five years ago, it was difficult to figure out annual VC investments in Africa. Nowadays the challenge is to choose the number you want to follow.
This is the case with three risk finance studies for Africa that have had different results.
The numbers and variance
The investment statistics published by the media company Disrupt Africa, the database WeeTracker and the Africa-oriented Fonds Partech have made some people scratch their heads.
From high to low, Partech The total VC for African startups was $ 2 billion in 2019, compared to WeeTracker's $ 1.3 billion estimate and Disrupt Africa's $ 496 million estimate.
This corresponds to a considerable margin of $ 1.5 billion between valuations. The variance was filtered down to the country's VC ratings, although it was somewhat less sharp.
Partech and WeeTracker shared the same top 3 countries for VC investments in Africa in 2019 – Nigeria, Kenya and Egypt – but with differences of $ 100 million.
Disrupt Africa has developed another lead market for startup investments on the continent – Kenya – although the estimate of $ 149 million for the East African country was $ 500 million lower than that of Partech and WeeTracker's VC leader Nigeria.
What explains the big deviations? theinformationsuperhighway spoke to each organization (and reviewed the reports) and found that the conflicting statistics stem from different methods – namely, defining what constitutes a startup and an African startup.
Partech's higher overall VC rating for the continent is based on broader parameters for companies and the quantification of investments.
"We do not limit the definition of startups according to the age of the start-up or the amount of funds raised," Partech General Partner Tidjane Deme told theinformationsuperhighway.
As a result, the fund included a Visa investment of $ 200 million in Nigerian financial services company Interswitch . The company round was certainly technology-related, although only a few Interswitch – which was founded in 2002, acquires companies and has a risk fund – would classify as a startup.
Partech's higher annual VC for African startups could also result in sensitive investment data being collected.
"We … collect and analyze undisclosed businesses and, thanks to our relationships within the ecosystem, access more detailed information," the fund's report said.
WeeTracker's methodology also included data on undisclosed startup investments and opened the count to funding sources outside of VC.
"Debts / credits, grants / awards / prizes / non-equity support, crowdfunding and (and) ICOs are included," WeeTracker clarified in a methodology note.
Disrupt Africa took a more conservative approach between business and investment. "We are a little tighter about what we consider to be a startup," Tom Jackson, website co-founder, told theinformationsuperhighway.
"In the clearest case, an African startup would be headquartered in Africa, founded by an African, and have Africa as its main market," says the Disrupt Africa report – although Jackson found that all of these factors did not always match.
"Disrupt Africa is addressing this issue on a case-by-case basis," he said.
Partech defined an African startup to be more liberal, including investments in technology companies that see Africa as their main market, but did not insist that they be founded or operate on the continent.
This opened the door to major rounds to Africa in 2019, New York-based tech talent accelerator Andela, and investments in Opera and OPay industries in Nigeria.
Disrupt Africa's report not only followed a more conservative definition of the African startup, but also referred to early stage companies in particular. The site's report primarily counted investments for companies founded within the past five years and excluded "spin-offs of companies or other large companies … that have developed beyond the start-up".
Similarities between reports
Despite all the differences in the annual VC counts for Africa, there were some similarities in the investment reports from WeeTracker, Partech and Disrupt Africa.
The first was the rise of Nigeria – with Africa's largest population and economy – to the top destination for VC start-up investments on the continent.
The second problem was the awareness of fintech as the most funded startup sector in Africa. In Partch's report, 54% of all VCs and WeeTracker's study generated $ 678 million of the $ 1.3 billion for startups.
An unfortunate commonality in each report was the predominance of start-up investments in English-speaking Africa. No French-speaking country made it into the top five in one of the three reports. Only Senegal registered on the Partech country list with a small VC of $ 16 million in 2019.
The Dakar Angel Network was launched last year to close the resource gap for startups in French-speaking African countries.
There may be no right or wrong statistics for annual investments in African startups, but only three reports with different methods that capture unique snapshots.
Partech and WeeTracker provide a broader view of different types of financial support for technology companies operating in Africa. Disrupt Africa's rating refers more specifically to a standard definition by VC for startups originating in and operating in Africa.
Three reports with different numbers on the continent's start-up investments are a significant upgrade to what was available not so long ago: little to no formal data on VC in Africa.