Rough Diamonds: Is It Time To Invest In African Tech Startups?

Rough Diamonds: Is It Time To Invest In African Tech Startups?

Africa’s tech scene is dotted with several startup incubators, innovation hubs and funding competitions and can easily be ignored by would be investors as too nascent to warrant any attention.

A closer look however reveals something else. Diamonds in the rough, as indicated in a report by Investopedia.

According to Frost & Sullivan, the regions e-commerce market is estimated to reach $50 billion within the next three years, from just $8 billion in 2013, mainly due to a rapidly growth in mobile and Internet markets throughout the continent.

With six out of the ten fastest growing economies over the last decade coming from sub-Saharan Africa, the good growth is fueling e-commerce and other areas of the IT sectors in many countries on the continent.

Going by the amount of investments sunk into Africa tech firms in the recent months it is clear that investors are now paying more attention to the region, fueling speculation that the region is quickly becoming the next big startup hub after Asia.

Just this week, Africa’s online classified firm One Africa Media received $10 million in additional funding  from one of its shareholders, Australian-based employment site Seek. The capital injection pushed One Africa’s valuation to $100 million just three years after it was formed.

Other African tech firms that have benefited from foreign funding include e-commerce operator Jumia that received a round of investment funding totaling $150 million and Weza Tele that is estimated to have received  $1.7 million funding from AFB.

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Local Investors joining in

Takealot and Konga have also both received significant rounds of investment funding.

Locally, telecommunication firms have realized the raw potential tech startups have and they are moving to partner with them in developing ideas through initiatives such as Millicom’s $10 million Think Accelerator program in Rwanda or Safaricom’s $1 million startup investment fund in Kenya.

Global technology and research firm IBM recently also announced that it will invest more than $60 million into a new tech hub and startup accelerator to be located in Johannesburg, South Africa.

Other investors that have discovered the allure of African tech startups include VC4Africa, a community of early stage investors and startups that says it doubled investment on the continent to $27 million in 2014, from just $12 million in 2013, and London-based NewGenAngels.

According to VentureBeat, Kenya and Nigeria are leading Africa in terms of fundraising and startups. While Nigeria has the highest number of startups, Kenyan techpreneurs are getting the most funding as indicated in this list compiled by White African.

There are some who feel that Kenya’s tech scene is full of fluff (startups that are not going anywhere), others think investors seen to sift through the startup buffet that is emerging from the country and region at large and make a decision for themselves.