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Your hot takes 🌶 , the funding slow down and Africa Tech Meetups

Plus, McKinsey's 47 page fintech report in 2 minutes ⏰

September 15, 2022

Happy Friday!

We’ve had 30 new readers join us in the last week - welcome to all of you.

In case you missed it, Prox Weekly is your 5 minute rundown on Africa’s tech scene. 7 minutes if you’re a slow reader🐢

If someone sent you this, make sure to sign up below and join 353 others who are across Africa’s Tech News.

Before we dive in, two Public Service Announcements:

Africa Tech Meetups 🍻

I wanted to make sure that my Singapore and London-siders know I’m hosting Tech in Africa meetups to hang out with you all and have a few drinks.

🇸🇬 Singapore - 16th September - today! Will be at Draper Startup House from 5pm - come along. Link here for more details

🇬🇧 London - 23rd September. London is actually at capacity 😅 but email me and I’ll send you the details.

We’re moving to Beehiiv 🐝

This will also (most likely) be our last update on Substack. We’re moving on up to Beehiiv.

This wont change much for you, but on my end it’s a much better experience for usability and growth.

Here is what you need to know:

  • I already moved all of your emails over to Beehiiv, and my next post should come from there.

  • Your email server wants to filter out junk, and it may think the new “Prox Weekly” is junk. If you receive the welcome email in your spam folder, please move it to your normal inbox.

  • By replying to the welcome email, it will signal your email server to “trust” beehiiv. If you can reply “received” to the welcome email from beehiiv, I would really appreciate it

  • I uploaded my old posts to beehiiv and updated all of my links to redirect there.

  • I will leave my Substack page up and running, so any old links to this content will still work.

Boring admin out of the way, let’s move on to what’s happening in Africa.

Here is what to expect in this weeks edition:

  • Your responses to last week’s The Round of Death 🌶

  • Africa’s slowest funding month all year 📉

  • McKinsey’s 47 page Fintech in Africa report in 2 minutes ⏰

Okay, let’s dive in.

Round of Death Responses

Last week I wrote about Africa’s huge Seed to Series A funding gap. If you haven’t already, read it here.

I asked you why there is such a steep drop in funding between Seed and Series A and got a lot of different perspectives and hot takes.

Here are some of the highlights:

To say that African startups typically perform better than their western counterparts, I think that's too early to tell.

I think the big elephant in the room is Africa's inability to fund its own startups, and that the majority of funds consider Africa a high-risk continent.

Patrick, Startup Advisor

When it is time to raise a Series A and further rounds, they will have to turn to investors in the West rather than at home. Complicates matters. Most VC firms in Africa fund early stage rounds.

Jonathan, Analyst @ Stears

Frankly a lot of BS was funded at the pre-seed stage that was never really going anywhere. The once heralded unicorns are wrapping up down rounds to the tune of 50% drops. Its a necessary correction and the drop off at series A to me is a necessary filter.

Principal at an Africa VC (spicy 🌶)

I beg to differ on the third point. There is actually enough funds in Africa but the region requires enlightenment on the part of large institutions, and persons with such fund to see the benefits that parties stand to gain by investing in startups.

Michael, Founder at Irentify

It also has to do with timing, eventual obtainable market size, the realities of expansion, depth of talent of founders, middle management and also investors at all stages. Early ecosystems take time, failures and continued education of the continent and commitment of institutional LPs to keep the momentum going.

There are different games we need to play outside of US and China in venture..

Jeffrey, Managing Partner @ Golden Gate Ventures

I’ve absolutely loved reading these and want to hear more of your takes.

If you want to weigh in but haven’t yet, you can give me your hot take here.

Venture funding pumps the breaks on the continent ✋🏾

In August, funding continued to slow down on the continent - the second month to receive less funding than the month before:

🤝 Number of deals: 58

💰 Amount raised: $227.6m (compared to $246m in July 2021)

📉 Africa’s funding in August slowed down to 8% less than July’s funding. This is also a massive (68%) lower than August 2021’s funding.

💸 The biggest rounds this month were TeamApt ($50m), ArabyAds ($30m) and Homzmart ($23m) - all companies in the growth stage.

🎲 My bet from last month was 50% right. I guessed that funding would grow from July ❌ and would be lower than August’s 2021 funding ✅

🤔 August 21 was a mega-funding month. While it’s a drastic drop from last year, August 2021 was a super-funding month, with OPay’s 200m Series C, Wave’s 200m Series A, and Andela’s $200m Series E.

It might be a while until we see the next 9-figure funding stage round in Africa, but hopefully it’s sooner rather than later.

End of the Beginning of African Fintech 💰

Last week, McKinsey published a 47-page report on Fintech in Africa.

McKinsey stated that Fintech in Africa is at ‘the end of the beginning,’ and we’re about to experience a ‘fintech disruption.’

Here are 7 super-quick take home points from McKinsey’s report on Fintech in Africa👇🏾

1) Cash is (still) king 💵

90% of transactions in Africa are still cash based, leaving lots of room for fintech to grow on the continent.

2) Fintech penetration is still low 🤳🏾

Despite there being over 2,000 African fintech companies, only 3-5% of Africans use fintech products

3) Revenue is on the rise 🚀

African fintechs made between $4-6 Billion in revenue in 2020. This is expected to grow 8X to reach $30 billion by 2025

4) Fintech is cheaper and better for consumers

Fintech solutions are up to 80% cheaper than traditional banks, and consumers can save almost 3x than they would with traditional banks 🙌🏾

5) South Africa dominates fintech penetration 🇿🇦

40% of fintech market value is concentrated in South Africa

6) These are the countries and regions to watch out for in Africa’s fintech boom:

  • 🇬🇭 Ghana - 15% growth per annum

  • 🇸🇳 Francophone West Africa - 13% growth per annum

  • 🇳🇬 Nigeria - 12% growth per annum

  • 🇪🇬 Egypt - 12% growth per annum

7) August funding has slowed down, but fintech is still on the rise

African fintechs raised the same amount of funding in the first 5 months of 2022 as they did during the whole of 2021 📈

That's McKinsey's report on African Fintech in two minutes.

What do you think of fintech in Africa’s potential? Let me know below 👇🏾

If you enjoyed this and know someone else who might please, share it across!

Catch you next week!