Kenya is among the top African countries that attracted the highest share of financing for start-ups and small businesses with exceptional growth prospects in the past five years (2014-2019), the African Private Equity and Venture Capital Association Ltd (AVCA) said in this month’s report.

South Africa had the most venture capital (VC) deals with 21 per cent of the total early-stage investments, Kenya got 18 per cent and Nigeria 14 per cent.

Venture capital is a form of private equity and a type of financing that investors provide to start-up companies and small businesses that show long-term growth potential.

The financing usually comes from well-off investors, investment banks and other financial institutions and can be provided in technical or managerial expertise.

According to the report, as a region, southern Africa attracted the highest number of VC deals (25 per cent) in Africa during the period under review, followed by East Africa (23 per cent) and West Africa (21 per cent).

By value, deals in consumer discretionary (28 per cent), financials (23 per cent) and industrials (18 per cent) attracted the largest share. The utilities sector was popular among early stage deals, with investors supporting companies that provide alternative power solutions.

Financial technology (fintech) firms dominate the African start-up scene, but afro-entrepreneurship has also grown within the utilities, logistics, transportation, e-commerce, healthcare and agribusiness sectors.

Nearly one third (32 per cent) of the total number of early-stage investments reported in Africa in the period were seed stage deals, that is initial equity funding for start-ups.

Series A and Series B transactions (subsequent rounds of funding after start-ups have developed strong track records) together accounted for 29 per cent of the total volume, and 38 per cent of the total value of early stage deals.

VC DEALS

However, 65 per cent of the total number of VC deals reported were below $5 million, while 25 per cent were between $5 million and $20 million, and just three per cent were above $50 million in size.

Corporate venture firms from North America played a key role in bridging funding gaps, accounting for 37 per cent of the total number of corporate venture firms that participated in VC deals in Africa from 2014 to 2019.

Foreign investors have been attracted by new opportunities and markets, with North American investors representing 42 per cent of the number of investors that participated in VC on the continent between 2014 and 2019, followed by European-based investors at 23 per cent.

Africa-based investors accounted for 20 per cent, followed by Asia-Pacific (8 percent) and investors based in the Middle East (six per cent).