COVID-19 could see African startups miss up to $1 billion in VC funding in 2020: report

In 2019, Africa tech startups raised upwards of $2 billion, but that could drop to @1.2 billion due to COVID-19.

Covid-19 impacting African startups

In 2019, Africa tech startups raised upwards of $2 billion. It accounted for a 74% upside on the $1.16 billion the previous year. Last year the number of companies raising funds nearly doubled, increasing from 146 in 2018 to 234 tech startups.

In Q1 2020, startups in Africa raised $350 million, with Nigerian companies accounting for $55.3 million in the same quarter. The year began well with a series of deals, including 54gene raising $15 million and Flutterwave and JUMO bringing in a combined $90 million from investors.

Yet, despite successful rounds like Helium Health’s recent $10 million funding, AfricaArena has released a report that estimates venture capital (VC) funding for African startups in 2020 could drop by as much as 40%.

The African tech accelerator noted in its report that VC funding on the continent will decline following the coronavirus pandemic.

2020 started off well for Startups

As per the report, 2020 started off well and it appeared growth in investment was set for an uptrend. However, the industry has been hit by “the COVID-19 crisis.”

There is a lot of uncertainty, with several companies suffering major challenges and resorting to lay-offs among other impactful measures. And that has informed the report’s outlook.

“We expect deal activity to fall sharply in Q2 and Q3 2020, primarily fuelled by VC investors doing refinancing deals on their portfolio,” AfricaArena notes in the report.

If there are no pick-up deals, startups could manage about $1.2 billion. The best-case scenario would be $1.8 billion if VC funding picks up in the fourth quarter. Post-COVID-19 recovery and upbeat investment could, however, see funding rise to $3 billion in 2021.

The report forecasts African startups will raise between $2 billion and $5 billion in the next two years.


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