North Africa VC Funding Market Map – H1 2021

In previous reports, we have highlighted investment trends that show how start-ups operating in North Africa’s e-commerce, financial services and transport sectors are becoming a go-to for investors. At the mid-way point of the year, start-ups across North Africa have already surpassed the $145 million USD they closed in 2020.

This trend seems to show no sign of cooling off in the immediate future. Over the past month, the Dubai-based VC Nuwa Capital announced the first close of their $100 million USD fund focussing on North and East Africa. Even more recently, the National Bank of Egypt has secured a $100 million USD loan from the European Bank for Reconstruction and Development (EBRD) to support SME business across the country. So, is this recent injection of cash translating into bigger opportunities for start-ups?

A strong start to 2021

In June, Egyptian trucking and logistics company Trella secured a $42 million USD Series A to expand services into the Middle East, Pakistan, Afghanistan and North Africa. The round was led by Maersk Ventures and Raed Ventures, and is one of a number of larger later-stage rounds contributing to a strong 6 months for the North Africa region.

E-commerce companies Homzmart and Mubawab both secured funding in rounds topping $10 million. Homzmart closed a $15 million USD Series A round in May 2021, led by MSA Capital and Nuwa Capital, and Mubawab closed a $10 million USD Venture round in March, led by the Emerging Markets Property Group.

The financial services sector also saw Expensya, a provider of accounting software, secured a $20 million USD Venture round from investors including of Avenir Growth Capital and Silicon Badia. Paymob, a payments provider, secured a $18.5 million USD Series A from Global Ventures, A15 and FMO.

2021 has seen a total of $166.1 million USD invested into North Africa’s technology companies across a total of 52 funding rounds. This exceeds 2020 total of $145.8 million USD raised across 110 funding rounds.

While there was a considerable drop in the total recorded funding in Q3 and Q4 2020 (which likely coincides with the global Covid-19 pandemic), the total number of deals has broadly remained consistent falling from a median value of 25.5 deals per quarter in 2020 to 24.0 deals per quarter in H1 2021.

A focus on later stage deals?

In contrast to the increase in total funding, the amount of funding at the early pre-seed and seed stage (where funding rounds total less than $550,000 USD) has decreased since 2020.

In 2019, early-stage funding rounds accounted for $7.45 million USD across 55 funding rounds (42% of total funding rounds). The total amount of investment increased slightly in 2020 to $7.6 million USD across, however this was across fewer funding rounds (37 in total, accounting for 34% of the total number of rounds). In 2021, there has been a total of $2.6 million USD raised across 18 funding rounds (37% of the total funding rounds).

Looking beyond E-Commerce?

The proportion of funding rounds secured by e-commerce and online retail start-ups in North Africa increased from 22% in 2020 to 27% in H1 2021. The financial services sector also saw an increase in the number of funding rounds, increasing proportionally from 15% to 18% over the same period.

The EdTech sector saw the largest drop in proportion of funding rounds secured, reducing from 11% to 2% between 2020 and H1 2021. This was followed by the transport and logistics sector which reduced from 15% to 12% and the HealthTech sector which reduced from 7% to 6% over the same period.

What next for North Africa’s Technology start-ups?

The reasons behind the increase in funding seen in North Africa is likely due to a multitude of factors. Greater levels of support such as the Tunisian start-up act aim to help support entrepreneurs as they navigate the early stages of the start-up lifecycle. From a regulatory perspective, the Egyptian government recently announced that they have passed legislation aiming to regulate and govern non-banking fintech. It is thought that this is to help entice private investors that had been previously reluctant to put money into Egyptian finance technology, possibly due to nervousness surrounding the expansion of state ownership in the economy.

The amount of available financial support with this Sawari Ventures, and Algebra Ventures both announced new funds in 2021, which is more good news for start-ups in the region. Sawari Ventures, an Egypt-based VC, closed a $71 million USD fund for Egyptian start-ups in Q2 2021, and Algebra Ventures announced that they have opened a $90 million USD fund, with the first close expected be announced later this year.

Whether this renewed focus supports continued growth remains to be seen, but perhaps this is further indication of a more permanent rebalancing of focus away from the established start-up hubs such as those found in Nigeria, South Africa and Kenya?