SA: fewer start-ups, but bigger bucks

Eleven SA start-up innovations received a total of $2.8 million in investment last year.

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South African start-up companies, including those in the tech sector, are attracting the biggest amounts for investment across the continent.

This is according to Venture Capital for Africa's (VC4Africa's) latest research: 2015 Venture Finance in Africa. The report also indicates Nigeria has the most start-up investments by volume while, overall, the total amount of money pumped into Kenya's innovation sector is the highest among African countries.

The research is based on VC4Africa's community and includes the responses of 257 entrepreneurs and 71 investors. Its findings include that the average venture was responsible for 5.7 jobs last year, a figure that will quadruple by the end of this year.

In addition, 49% of the ventures surveyed start generating revenue in their first year of operation, and expect to invoice more than $100 000 in their fourth year. VC4Africa also found 44% of new ventures are successful in securing external capital, with an average amount of $205 374 being invested, up from $129 348 in 2013.

VC4Africa notes it was able to track 104 investments in start-ups across Africa last year, which garnered a total of $27 million in investment. It noted the bulk of these - 24 - were in Nigeria, then Kenya (19), Tanzania at 12, and South Africa, with 11 investments. "Countries like Nigeria, Kenya, South Africa and Ghana are often named as examples of start-up hotspots in Africa."

It adds the largest average investment is made in SA, at $250 000, followed by Kenya and then Uganda. "It is known that South Africa's start-up scene includes more mature ventures and explains the bigger ticket sizes."

Recently, South African VC4Africa member 8bit - an advertising platform - secured $110 000 in funding, while prepaid technology provider Nomanini also secured additional capital.

The total of all tracked start-up investments is highest in Kenya, at $4.7 million, followed by South Africa, at $2.8 million. Some African start-ups that have raised funding include TopCheck, Tugende, IroFit, Ubongo, Soko, Karibu Solar, and Kiro'o Games. These early-stage companies, which require less than $1 million in funding, make smart use of technology, and are disruptive in their application of a business model.

These findings will be shared by VC4Africa co-founder Ben White tomorrow at the 2015 Global Entrepreneurship Congress in Milan. The platform has more than 20 000 members in 159 countries, including 600 investors.

White notes: "The research shows there are a growing number of businesses that are successfully growing their operations over time and adding much-needed jobs to the African marketplace. This is a key message to investors. Now is the time to get involved in this space."

Number, average and total of start-up investment in selected African countries