How dominant fintech is still the sector to beat for African startup funding


Looking at funding figures for 2019, it seemed like fintech – long Africa’s most attractive destination for tech startup funding – might be losing some of its allure. Though the number of funded ventures continued to rise, total investment had declined by almost 20 per cent from 2018.

Fast forward 12 months, however, and the picture is a little different. Though growth in the number of fintech startups that raised funding slowed ever so slightly, its share of total backed ventures was higher in 2020 than in 2019. 

That is according to the just-released African Tech Startups Funding Report 2020, open-sourced and made available to all, for free, by Disrupt Africa in partnership with Catalyst Fund, RTB House, Quona Capital, 4Di Capital, Villgro Africa, Lateral Capital, and Otundi Ventures.

The report, which was the first of its kind upon its inaugural publication in 2016 and is now on its sixth edition, tracks investment into the continent’s startup space, and highlights growth in funding for African tech ventures. The latest edition details an impressive 2020, which saw new records set. 

Dominant fintech

This included in the fintech space, which saw 99 startups raise investment over the course of the year, representing 24.9 per cent of the overall total. This was up 28.6 per cent on the 77 ventures that raised in 2019, with fintech’s share of funded startups marginally increasing from the 24.8 per cent it represented that year. 

Meanwhile, the combined amount raised by fintech companies over the course of the year jumped 49.3 per cent to US$160,319,065, again giving the fintech sector a larger share of the African total than the year before (22.9 per cent compared to 19.1 per cent in 2019). Indeed, fintech’s total raised funding was 55.6 per cent more than the second placed sector in this respect – e-health. 

Fintech, then, is demonstrably still the one to beat when it comes to what vertical is most attractive to Africa-focused tech investors. This is due to many factors. At least half of Africans still lack access to any kind of formal financial services, and many of those that do have access still count as underserved. Fintech startups across the continent – undoubtedly more than the 491 we counted as part of our last Finnovating for Africa report – are addressing these access challenges.

Moreover, fintech is developing and maturing as a sector. Even as areas such as payments and lending become saturated in more developed African markets, startups are increasingly active in areas like insurtech, investtech, and KYC. There also remains substantial potential for startups that have built a customer base for, say, a payments solution, to bolt on lending and insurance products, with many African fintechs moving towards full “digital bank” status.

Fintechs are also increasingly collaborating with – rather than competing against – established banking incumbents, with African banks joining the throng of active investors in the continent’s fintech space. South Africa’s Standard Bank and Nedbank are leading the way here. Central banks and regulators are also increasingly launching sandboxes to allow fintechs to solve nation-specific challenges and plug into national systems.

All of this – huge potential to grow from both geographic and product perspectives, massive addressable target markets, innovative solutions breaking down barriers, and growing links with both corporates and regulators – is leading to strong and sustained investor interest and confidence in Africa’s fintech space, and we can expect it to retain its status as market leader for some time yet.

Developments elsewhere

All that is not to say, however, that there have not been positive developments elsewhere. The overall growth in investment coming into African tech startups is by no means solely attributable to fintech, and though the sector is still progressing solidly, its growth is in fact being outpaced by other verticals.

The entertainment sector was the biggest-growing one in 2020, with the number of companies raising funding leaping by 1,765 per cent. By the same metric, recruitment and HR grew 272.4 per cent, e-health by 257.5 per cent, and prop-tech by 191.5 per cent. E-commerce and retail-tech, one of the closest challengers to fintech in terms of securing investment, saw total funds grow by 85.6 per cent. 

But which spaces are the closest to challenging fintech for funding? The gap is still large, but the numbers over the last few years suggest e-commerce and e-health are the closest challengers, and both spaces are developing strongly.

The African e-commerce and retail-tech sector has been among the continent’s most volatile for some years, but now appears to be on a solid upward trajectory, based partly on the emergence of the retail-tech segment on the continent. 2020 saw 55 e-commerce and retail-tech startups secure funding, an increase of 77 per cent on 2019. Those 55 startups raised a combined US$87,785,000 in funds – up 85.6 per cent on the year before. 

E-commerce and retail-tech as a sector has been gaining in maturity, with startups increasingly focused on lucrative niches rather than mass, Jumia-style e-commerce, and tangible successes breed investor confidence. Meanwhile, the sector is also benefiting from the emergence of retail-tech – solutions that help existing, physical merchants with aspects of their business such as inventory management, product ordering, loyalty solutions and the like, rather than online storefronts in the Amazon or Jumia style –  as a niche of some force within the wider e-commerce space. 

Other exciting developments were to be found in the e-health space, which could be said to have come of age in 2020. In a breakthrough year, African e-health startups raised more funding in 2020 than they did in all of the previous five years combined. The sector powered into second place for total funding investment secured, banking US$102,994,000, and third place for the number of ventures that raised, with 41 startups backed. 

All of this continued a growth trajectory that began in 2018, while the e-health space in Africa is one of few that actually stands to benefit from the effects of the COVID-19 crisis

Elsewhere, less mature sectors can be forgiven for some uncertain steps, and even some steps back here and there. The logistics and transport spaces, for example, saw more startups receive funding, though the combined amount raised by startups in each of these two areas declined. Agri-tech saw fewer startups raise more money than in 2019. These sectors are all making progress, but at this early stage of their development it remains uneven.

What is key is that there is impressive, if sometimes unsteady, progress on most fronts. Yet as we move into 2021 fintech remains the undisputed champion when it comes to attractiveness to investors of all shapes and sizes.

For more information, or to download the report, please visit, or email Gabriella on [email protected], or Tom on [email protected].


About Author

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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