71% of African startups are generating revenue

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Seventy-one per cent of African tech startups are generating revenue, while over 40 per cent have received outside funding.

That is according to this year’s edition of the annual Venture Finance in Africa report by VC4Africa, the full version of which can be accessed here.

The report, which is based on data collected from 591 startups in 48 African countries, as well as 111 Africa-focused investors, aims to aid a better understanding of the critical success factors for African ventures.

With 71 per cent of the surveyed startups generating revenue, VC4Africa said the data shows that African markets are full of opportunities. This statistic is a small increase from previous years when 70 per cent indicated they were generating revenue, while 23 per cent of the startups are generating more than US$50,000.

“This number is lower compared to previous years, which might imply that more early-stage ventures are entering the ecosystem. Other macro-economical factors, such as devaluing local currencies, might also be reasons for the decrease in yearly revenue generated,” the report said.

Meanwhile, 42 per cent of the ventures in the dataset have received outside funding, with 52 per cent of these companies going on to raise more than US$50,000. The report finds most most investments are secured by Nigeria-based ventures: 90 investments, compared to 52 in 2016.

However, average investment are higher in South Africa than in Nigeria and Kenya, which VC4Africa said can be explained by the fact the South African startup space is one of the most developed on the continent.

Just over half of the startups surveyed employ staff, with companies that do so creating seven jobs on average, while the median staff count is 3.1.

VC4Africa said while many factors go into building a company, this year’s research analysis makes clear that a strong team of founders is the key driver of venture success in Africa.

“All other factors aside, the right team makes the difference and is the single most unique trait we see across the companies making commercial progress,” the report said.

“Established and emerging ventures are set up by slightly larger founding teams compared to less developed ventures. They also are more likely to include both genders in the founding team. Most notably, founders of established and emerging ventures are older.”

Sixty-five per cent of African tech startups have multiple founders, with 46 per cent of the companies including a female founder in their team. Exclusively female teams form nine per cent of the total ventures. Uganda and Kenya have the highest female participation, while South Africa has the lowest female participation rate.

“Entrepreneurs are a critical driver of innovation and development. There’s a growing consensus that the future of the African continent depends to a great extent on entrepreneur success. Core to the network are starting African entrepreneurs that have the potential to build scalable companies,” the report said.

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Passionate about the vibrant tech startups scene in Africa, Tom can usually be found sniffing out the continent’s most exciting new companies and entrepreneurs, funding rounds and any other developments within the growing ecosystem.

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