The top 5 pan-African startup sector developments of 2020

Individual startup ecosystems across the continent, be they in South Africa, Nigeria or Kenya, may steal a lot of the limelight, but the African tech startup sector as a whole is growing at pace.

Here are Disrupt Africa’s five biggest developments of the last 12 months.

Paystack gets acquired

This was a very big deal. The acquisition of fintech company Paystack by global payments leader Stripe, which reports said could have been worth more than US$200 million, was a landmark moment for the African startup scene. A payments company that helps businesses in Africa get paid by anyone, anywhere in the world, Paystack was in October acquired by Stripe, which led Paystack’s US$8 million funding round back in 2018

Stripe’s payments software is used by customers including Amazon, Google, Shopify and Zoom, and its acquisition of Paystack is the latest move in its international expansion. Paystack will be Stripe’s catalyst for growing internet commerce in Africa, with the Lagos-based startup having plans to expand across the continent, starting with a pilot in South Africa.

2020 – the year of the early-stage fund in Africa

Early-stage funding has proven a problematic gap within the continent’s startup space, but developments in 2020 went some way to addressing that. A host of new funds targeting startups at the pre-seed and seed stages launched, the key ones being Sherpa Ventures, Acuity and the Future Africa fund, the latter founded by Iyinoluwa Aboyeji of Andela and Flutterwave fame.

Meanwhile, seed fund Kepple Africa Ventures is probably the most active VC on the continent, having backed 36 startups in 2020 alone. Coupled with the growth in angel investing – and the increasing number of angel investor networks across Africa – it means there has never been a better time to seek funding as an early-stage startup on the continent.

Startups are buying startups

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Funding is on the rise, for sure, but acquisitions, in spite of Paystack’s success, are still relatively few and far between. M&A activity is happening in the African startup space, however, though it is usually startups doing the acquiring in order to beef up their product offerings.

Startups active in this way in 2020 included Paga, Farmcrowdy, Snapplify, Autochek and AfricaSokoni, with startup-startup purchases growing in number and signifying a developing trend that began in 2019.

African tech riding out COVID-19

When the COVID-19 crisis hit, things didn’t look good for the African startup space. Funding in particular was meant to take a serious hit, and there were fears for the survival of many of the continent’s most exciting young businesses. Some startups were seriously impacted, such as SafeBoda, iROKO and Yoco, but as it happens, African tech has managed to ride out the crisis, though it isn’t over yet. 

The ecosystem reacted with new funds and initiatives to support startups through the crisis, as well as encourage entrepreneurs to develop solutions to mitigate the impact of COVID-19 (see here, here, here, and here). Startups launched new COVID-related offerings (see here, here and here) and some sectors, such as ed-tech and e-health, boomed. 2020 looks likely to be a record year from a funding perspective as well, so dire predictions of startup doom related to the coronavirus crisis have yet to come to pass.

More and more African governments are legislating for startup success. The first specific startup law globally was passed in Italy in 2012, and Tunisia and Senegal were the first two African countries to have enacted them. A host of countries, including Mali, Ghana, Ivory Coast, the Democratic Republic of Congo (DRC), and Rwanda, are expected to implement their own shortly.

In September, it emerged that Kenya was in the process of adopting startup-specific legislation for the first time after the gazetting of “The Startup Bill, 2020”. Kenya is the first of the “big five” startup ecosystems to publish its own proposed legislation, though there have been some movements to do the same in South Africa. “The Startup Bill, 2020” was published in the Kenya Gazette on September 14, sponsored by Nairobi County senator Johnson Sakaja, under the auspices of the Ministry of Education, Science and Technology, with most of the implementation assigned to the Kenya National Innovation Agency (Kenia).

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