No doubt, 2020 was a year filled with difficulties and complications for many businesses. While some niche markets saw proliferation, the year of the pandemic almost unanimously led to significant cuts in funding and threw curveballs at startups preparing to launch successfully.
Yet in the shade of the disastrous 2020, a new startup ecosystem continued to flourish. It's one that may not immediately come to mind as fertile ground for business growth, but it has consistently proven to be a haven for powerful entrepreneurial initiatives.
That fertile ground has become the African continent — and with four solid unicorn companies, along with many other promising young ventures, with it.
In recent years, the African startup market has received an influx of capital from both local and international investors — and the numbers grew significantly year on year. To truly fathom the spike in investment, TechCrunch drew a comparison between the investment in 2015 — $400 million, to be exact — and the whopping $2 billion four years later in 2019, according to Partech Africa.
While 2020 numbers were initially projected to increase further, the pandemic, caused them to stumble — yet despite the hit, they remained much higher than anticipated. According to TechCrunch, 2020 became a good year for acquisitions with "Sendwave’s $500 million purchase by WorldRemit; Network International buying DPO Group for $288 million; and Stripe’s larger than $200 million acquisition of Paystack."
Furthermore, even though total funding in 2020 was lower than in 2019, the young startups closed more deals in 2020 than in 2019: According to ParTech, 347 startups completed 359 deals in 2020 compared to 250 deals in 2019. When it comes to the industries or sectors leading the closed deals, it turns out that fintech, health tech, e-commerce and cleantech received the highest amounts of funding. Among the African countries competing for the most funding, Nigeria, Kenya and Egypt were at the top of the list of the countries that saw the largest share of investment.
In March 2021, Flutterwave, a unicorn startup with its roots in Nigeria, generated a lot of buzz by announcing a whopping $170 million Series C round, officially crossing the line of $1 billion in valuation and earning the title of the most recent unicorn stemming from the African continent. The unicorn, however, doesn’t have many companions on the list of billion-dollar startups with African origins.
De facto, there are three more startups that have exceeded $1 billion in valuation that currently operate in Africa. The list of these companies includes Fawry, Interswitch and Jumia. Let’s take a closer look at each of these companies’ history and current state to better understand their origins and areas of operation.
Technically, Flutterwave, a payment platform, is the most recent addition to the list of African companies with over $1 billion in valuation. The latest C Series round, led by Avenir and Tiger Global, rounded up the total investment in the company up to $225 million. The young unicorn, founded in 2016 by Iyinoluwa Aboyeji and Olugbenga Agboola, is currently headquartered in San Francisco but stems originally from Nigeria. It’s a fintech startup that facilitates payments and transactions across 33 African countries including Nigeria, Kenya and South Africa.
According to African Business, it’s on track to becoming the leading payment software provider for businesses from abroad — thanks to a variety of foreign countries looking to expand into the African continent.
Jumia is an e-commerce company that claimed the title of unicorn in 2016 when it announced a $435 million Series C in 2016. While its origins stem from Lagos, Nigeria, today, the e-commerce giant is incorporated in Germany with headquarters in Dubai. It was first dubbed the “Amazon of Africa.”
The company was the first unicorn in the history of the African startup ecosystem; however, since its debut, things have changed. Jumia went through an IPO in 2019, appearing on the New York Stock Exchange for the first time. At the time, the company was operating in 14 African countries with a valuation of $3 billion. However, the path hasn’t been clear and easy for Jumia since then. Now, the startup operates in 11 countries and its valuation was down to $250 million in 2020.
Fawry, another fintech startup with its roots in Egypt, is different from its fellow unicorns in its age and experience. It was founded in 2008 and eventually achieved the $1 billion mark in 2020, fueled by the pandemic and the increased need for payment systems to keep up with the African people’s spending habits.
While it’s difficult to say whether it is still a startup due to its 13-year-history, one thing is certain: It was the third company originally from the African continent that crossed the billion-dollar-mark in valuation. Today, Fawry reports 29.3 million users and facilitates over 3 million payment transactions in a day.
Interswitch, just like Flutterwave and Jumia, was founded in Nigeria. It announced its $1 billion valuation in 2019, after Visa acquired a minor stake in the company, according to TechCrunch. Similar to Fawry and Fultterwave, it is another company based in fintech. It was originally founded in 2002 by Mitchel Elegbe. Not unlike Jumia, Interswitch has many more years in the industry under its belt, making it easy for the company to quickly establish dominance in the largely cash-based African economy.
Clearly, despite the devastation it brought to the global economy overall, 2020 didn’t stop the growth of the African startup ecosystem in its tracks. Instead, African startups found their way to prosperity, doubling down on the sectors that grew in importance during the pandemic. It’s worthwhile to keep an eye on the developments in the startup world on the African continent — and maybe you will witness the next unicorn rise to an IPO in the next few years.
Originally published in Forbes