How COVID-19 changed Africa’s venture capital investment landscape

The economic impact of the COVID-19 pandemic has reverberated across the globe, and Africa's venture capital investment landscape has not been spared. According to a recent report, investments into African startups decreased from $1.9 billion in 2019 to $1.2 billion in 2020. To gain more insights into the current state of venture capital and startup investments on the continent, CNBC Africa spoke with Arthur Chupeau, Head of Ventures at The Baobab Network. One of the key takeaways from the discussion was the total number of deals recorded in 2020, which amounted to approximately 483, slightly surpassing the 2019 figure of 481. However, when excluding non-equity investment such as grants, prizes, and mergers and acquisitions, the total investment into African startups declined to $1.2 billion in 2020. This decline signals a shift in the investment landscape despite the increase in the number of deals. Another significant trend highlighted was the change in the stage of investments. There has been a noticeable increase in early-stage investments compared to later stages. In 2020, the number of seed rounds announced rose to 263, reflecting a 20% increase from the previous year. This shift underscores investors' willingness to take on more early-stage, albeit riskier, investments. The sector distribution of investments also saw some interesting changes. While FinTech remained a dominant sector, with $387 million invested in 2020, down from $750 million in 2019, other sectors like e-commerce and health tech experienced growth. This diversification of sectors reflects the evolving landscape of opportunities for investors in Africa. When asked about the impact of delayed vaccine rollouts on future investments, Chupeau emphasized the resilience of early-stage investments in Africa. Despite the challenges posed by the pandemic, investors have continued to fund startups, showcasing adaptability and a commitment to supporting African businesses. The change in consumer behavior has also influenced investor decisions, with a focus on aligning with current trends. In terms of risk management strategies, Chupeau highlighted the importance of providing support to startups, including hiring additional staff to enhance assistance, focusing on traction and progress, and adopting lean methods. Investors now prioritize strong market traction and sales from startups, underscoring the need for startups to demonstrate viability and growth potential. Adapting investment policies to address pandemic-induced challenges remains a complex task. Chupeau noted that regulatory responses vary across countries, with some implementing supportive measures for businesses and individuals. He stressed the need for policymakers to understand the tech ecosystem and provide tailored support accordingly. Looking ahead to 2021, sectors such as logistics, FinTech, healthcare, and marketplace models are poised to attract investments. The scalability of digital solutions in these sectors makes them appealing to investors seeking growth opportunities. In conclusion, Arthur Chupeau's insights shed light on the evolving landscape of venture capital investment in Africa amidst the challenges presented by the COVID-19 pandemic. While the investment landscape has shifted, the resilience and adaptability of both investors and startups offer hope for continued growth and innovation in the region.