NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Thursday, February 8, 2018

African startups had a record-breaking 2017 when it came to fundraising, securing a total of $195 million, according to the recently released Disrupt Africa African Tech Startups Funding Report.

An increasing number of startups are raising money, across more countries and a diverse array of sectors.  Yet the investor profile is also changing. Whereas in the past impact firms like Accion dominated the space, solely return-driven investors are now increasingly entering the sector, such as Greycroft Partners, Rand Merchant Investment Holdings and 500 Startups.

Yet it is not just a question of new firms entering the market. Existing African investors are also changing the way they work. Erick Yong is chief executive officer (CEO) of GreenTec Capital Partners, which has invested in the likes of Nigeria’s Farmcrowdy, Ghana’s AgroCenta, and Rwanda’s ARED.

He believes the gap between “impact” and “non-impact” – that is to say firms that are solely focused on deriving the biggest possible return on investment is diminishing as impact funds move towards more sustainable investments.

“Among impact funds themselves, more and more funds are focused on economically sustainable solutions and seek profitable opportunities, as opposed to just grant financing,” he said.

“We believe the trend will continue towards an increasing amount of investors seeking a double bottom line – doing well while doing good, seeking profitability along with some measurable impact.”

Photo courtesy of Dominic Chavez.