The Tech Startup Space in Africa –Present Realities and Possibilities

StartupBlink recently published the Global Startup Ecosystem Index 2021 – a list that takes into account several dozens of parameters including the number of startups, the size of the domestic market, the ease of doing business amongst others to create a map of the startup ecosystems globally.

The recently released list shows great promise and improvement for the African tech startup space. Three African countries featured in the ranking for the first time; Namibia (99), Ethiopia (100), and Mauritius (73), while some others moved up the rank; Kenya (61), Nigeria (63), Jordan (64), and Bahrain (66). Other African countries in the top 100 include Egypt which climbed 11 spots to rank 70th, Namibia ranked 99th followed by the vibrant seed ecosystem of Ethiopia in 100th globally.

With this ranking, South Africa is now in the 48th spot, and the first African country to make it into the global top 50. Lagos state Nigeria climbed up the ranking to the 122nd spot, overtaking Nairobi, Kenya (which now occupies the 136th spot) to become Africa’s top startup location. Lagos has also ranked in the global top 50 cities for E-commerce & Retail Technology and in the global top 100 for both Transportation Technology and Education Technology.

Several African countries now have locations listed in the global top 1000 cities, and locations like Ibadan (353), Abuja (466), Port Harcourt (906), Enugu (978), Benin City (979), and Kano (981) are present in the list-making Nigeria to have the highest number of ranked cities of any African nation.

This is all good news for the Tech startup system in Africa, and the available data can help founders and executives make intelligent decisions about the right location to build their startup. But what does this change for Africa?

Funding for the African tech startup ecosystem improved greatly in 2020, and according to the annual African Tech Startups Funding Report, 2020 released by startup news and research portal Disrupt Africa, 397 startups in Africa raised an impressive US$701.5 million in total funding despite the Coronavirus pandemic.

This shows positive growth and huge potentials for the continent and it does not escape one’s notice that the startups that have raised the most funds are those addressing the continent’s pressing challenges – the financial technology sector. However, Africa still has a long way to go in terms of funding and financing options.

The most significant challenge the tech ecosystem will face in Africa in the coming years is the lack of broadband internet infrastructure, as well as unpredictable regulatory decisions and policies. There is also a challenge in the access to necessary technologies. Most time, startups in Africa cannot work independently or provide a complete solution on their own and even if they get access to it, they do not have the means to afford the needed technology and expertise

This brings us back to the problem of funding. In some other continents, you can raise funding with just an idea, even without gaining traction, but in Africa, most investors wait for you to break even and gain traction before staking their funds. It is as though they are aware of the challenges in the space, and want to see how you can navigate through it before they can put their money into your startup.

Only very few companies have been able to raise money without traction and without showing some level of growth. But if you can access sufficient technology, expertise and funding, maybe through partnerships, to get your Minimum Viable Product (MVP) out into the market, then you are on to a good start. Other things should follow suit.

The article was written by Samuel Akinniyi Ajiboyede, the Founder and CEO of Zido Freight. You can find the original publication on his LinkedIn page.