East Africa VC Funding Market Map – H1 2021

VC-funding in East Africa has already got off to a rapid start in Q3 2021. In July, US and Rwanda based healthcare logistics company Zipline announced they had closed a $250 million USD venture funding. Following this, Guidewheel (formally known as Safi) a plug and play data and analytics company for the manufacturing sector announced they had raised a $8 million USD Series A. August has seen this continue, with WapiPay, a cross-border payments company announcing a $2.2 million USD funding round which included participation from EchoVC, MSA Capital, as well as Kepple Africa Ventures.

Total funding across the East Africa region in Q3 2021 has already reached a $283 million USD, bringing the total raised in 2021 to $433.2 million USD. However, while the median amount raised per quarter has increased from $84.7 million USD in 2020 to $118.6 million USD in H1 2021, the median number of deals per quarter has fallen slightly from 25 in 2020 to 24 in 2021.

The top 5 funding rounds over H1 2021 in East Africa have totalled $121 million USD. Funding trends elsewhere on the continent have shown a focus on e-commerce and consumer financial services, however, the largest funding round in East Africa was secured by Gro Intelligence, an agricultural data platform based in the Kenya and the US.

Two CleanTech platforms; Sun Culture and d.Light also secured funding rounds, with InsurTech Pula, and vehicle financing solution Tugende making up the top 5.

Steady growth in 2021

As we pass the mid-point of 2021 the total funding raised by start-ups in all regions of Africa has surpassed $1.8 billion USD across a total of 285 funding rounds.

The total amount raised in 2021 (year to date as of 6th August 2021), has exceed $433 million USD in funding across 59 funding rounds. However, the proportion of funding rounds secured by East African start-ups, when compared to all other regions, has fallen from 26.4% in 2019 to 20.7% in 2021 (year to date), with the proportion of the deal value falling further from 43.8% to 23.6% over the same period.

In Q1 2021, East Africa’s technology start-ups recorded a total of $118.6 million USD in funding across 25 funding rounds. This fell to $31.2 million USD in total funding raised across 23 funding rounds in Q2. As a result of recent raises by the likes of Zipline, Wapi Pay and Guidewheel, Q3 has seen a large jump in the total amount raised, recording over $283 million USD in funding over 11 funding rounds (up to and including the 6th August 2021).

Early-stage funding takes a dip?

After steadily rising year on year since 2018, the number of early stage funding rounds across the continent seems to have slowed in 2021. In 2018, there were a total of 167 Seed and Pre-seed funding rounds totalling $550,000 USD or less. This rose to 177 in 2019 and 186 in 2020. However, 2021 has seen this rate of growth slow somewhat with only 70 early-stage funding rounds being recorded over the first half of 2021.

The number of early-stage funding rounds in East Africa in 2018 totalled 39, growing to 40 in 2019 and 42 in 2021. However, the proportion of Early stage funding rounds secured by East African start-ups has fallen relative to the rest of the continent over the first half of 2021. In 2019, East African technology start-ups secured 22.9% of the total number of early-stage funding rounds, increasing to 23.1% of early-stage funding rounds in 2020. However, this figure has fallen to 20.3% of funding rounds in H1 2021.

Likewise, the proportion of early-stage deal value secured by East African technology start-ups has also fallen in H1 2021 relative to the rest of the continent, dropping from 22.8% ($5.4 million USD) in 2019, to 19.9% ($5.0 million USD) in 2020, and 15.8% ($1.7 million USD) in H1 2021.

A big year for e-commerce?

The proportion of FinTech funding rounds increased from 18% of total funding rounds in 2020 to 24% of total funding rounds in East Africa over H1 2021. The biggest proportional increase was seen in the e-commerce and online retail sector increasing from 8% in 2020 to 17% in H1 2021.

The number of funding rounds secured by companies in the Agriculture sector dropped from 15% to 8%, likewise the number of funding rounds secured by companies in both the Transport and logistics sector (19% to 7%) and Healthcare technology (11% to 7%) also fell over the same period.

Cause for concern?

The headline figures indicate that once again, East African technology start-ups are continuing to attract significant investor attention. But what is perhaps a cause for concern is both the fall in the number of funding rounds per quarter, and the number of early-stage funding rounds over the last 6 months relative to previous reporting periods.

These trends are not unique to the East Africa region, with similar trends being observed elsewhere on the continent. It is too soon to understand whether this is simply a short-term trend, or the beginning of a broader shift in focus.