South African startups draw millions in investment

New research shows that while South African startup companies attract the largest capital investment in Africa, Nigeria boasts the most startup investments on the continent.

The VC4Africa 2015 Venture Finance in Africa report, which tracks the progress across Africa’s startup funding scenes, found that South Africa has fallen behind the likes of Nigera, Kenya and even Tanzania in the number of startup ventures.

At the end of 2014, VC4Africa said it tracked 104 investments in startups across Africa, totaling $27 million. Most investments were located in Nigeria (24), followed by Kenya (19), Tanzania (12), South Africa (11), Ghana (10), Uganda (10), Cameroon (9) and Egypt (9).

Computer software, internet and e-commerce ventures accounted for the largest representation in the report at 24%, 21% and 17% respectively.

VC4Africa (Venture Capital for Africa) aims to be the world’s leading online platform for entrepreneurs and investors in Africa. It currently has 20,000 members in 159 countries, including 600 investors.

The research found that the largest average investment took place in South Africa at $250,000 (R3.07 million), followed by Kenya – slightly lower, but also rounded off to $250,000.

Uganda, at an everage investment of $152,00, was third on the list, followed by Tanzania ($66,000), Ghana ($65,000), Nigeria ($57,000), Egypt ($42,000), and Cameroon ($28,000).

“It is known that South Africa’s startup scene includes more mature ventures and explains the bigger ticket sizes. The research indicates this is also the case in Kenya, and that startup investments in other ‘startup hotspots’ Nigeria and Egypt are much smaller on average,” the report said.

VC4Africa said that the volume of deals in Nigeria points to the quick rise of the startup scene there, with the promise for much bigger deals expected in the coming years.

With a total investment of $4.7 million, Kenya attracted the most funding in Africa in 2014, followed by South Africa ($2.8 million), Uganda ($1.5 million) and Nigeria ($1.4 million).

In 2014, the survey yielded an average team size per company of 3.7 people. The 2015 survey reported a rise to 5.7.

The report found that 49% of the ventures start generating revenue in their first year of operation. By their fourth year, 34% of the ventures expect to book more than $100,000 in annual revenue.

VC4Africa  said that entrepreneurs with a venture profile were asked to participate in an online survey. The survey was sent to 1300 entrepreneurs and 257 entrepreneurs
responded, a 20% response rate.

Entrepreneurs were asked to report on their revenue, profit, and change in team size over time.

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South African startups draw millions in investment