Local startups retain spot among top 5 largest venture capital recipients

Twiga Foods

Twiga Foods staff grade bananas at one of the company’s warehouses in Nairobi in 2019. 

Photo credit: Jeff Angote | Nation Media Group

What you need to know:

  • Report notes that venture capitalists pumped more money into Africa's innovation ecosystem in 2021.
  • Financial sector drew the largest volume (23 per cent) of venture capital in the country in this period.

Kenyan start-ups received the fourth largest share of venture capital funds by volume in the year 2021, the 2021 Annual African Private Capital Activity Report shows.

According to the report, the financial sector drew the largest volume (23 per cent) of venture capital in the country in this period, attributed to the rise in fintech. This was followed by consumer discretionary (18 per cent) and information technology (15 per cent).

“With several traditional banks closed during the pandemic, many people turned to mobile money, digital banking applications and remittances to help support their families’ livelihoods and financing needs,” notes the report.

While Kenya managed to retain a spot in the top 5 largest recipients of VC funds by volume, the report however notes that total deal value decreased in 2021 due to increased competition in the East Africa region from neighbouring Rwanda and Uganda.

Nevertheless, it states that Kenya’s startup ecosystem remains robust, and that a strong macroeconomic performance in 2021, coupled with progressive regulation, will likely foster a resurgence in Kenya’s startup ecosystem.

“The recent introduction of a Business Regulatory Toolkit to assist local SMEs and foreign businesses navigate the regulatory environment will help improve overall performance and efficiency. Kenya’s Capital Markets Authority also instituted a Regulatory Sandbox Platform in May 2021, admitting nine FinTech start-ups to live test their products and services in a controlled environment free from the constraints of existing regulation,” noted the report.

Notable deals that took place in Kenya in 2021 include the Sh5 billion Series C funding in e-commerce food distribution platform Twiga Foods from a consortium of investors, the Sh4 billion investment in Victory Farms, as well as a Sh1 billion investment in asset financing platform M-Kopa.

In general, the report notes that venture capitalists pumped more money into Africa's innovation ecosystem in 2021 than the preceding seven years combined.

According to the report, the total value of private capital deals reported in Africa reached a record high of Sh740 billion, representing a 118 percent increase compared to Sh340 billion registered in 2020 – surpassing the annual average deal value of Sh400 billion between 2016 and 2020.

“Over the last two decades, Africa’s private capital landscape has established itself as an increasingly attractive and progressive region for private investment. As such, private capital fundraising has mirrored the trend of private capital deals - reaching a record 4 times year-on-year increase, which also exceeds the annual average over the past five years by 63 per cent,” noted the report.

The report attributes the gradual maturation of private investment in Africa to the success and visionary work of firms whose pioneering missions encourage the growth of African economies through digital transformation, innovation with finance as well as climate-smart agriculture.

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