COVID-Inspired Innovations in Africa and Investing in Africa’s Startups

The new wave of African innovations has brought governments, universities, corporates and small business together to come up with solutions to combat COVID. In Rwanda new ideas are emerging, from clever face masks to ventilator machines, and food delivery apps to contact tracing apps and robots. A team of students from Kenyatta University in Kenya have invented a ventilator machine that has met the standards of the International Organization for Standardization. Ghana and Uganda have also taken the lead to produce home-grown ventilators. Disrupt Africa in a new report “The High Tech Health: Exploring the E-health Startup Ecosystem Report 2020” presents good news in the E-health sector. According to the report, the number of startups active in the health-tech space in Africa has grown by 56.5% over the last 3 years, with 180 ventures currently in operation.

According to StartupBlink’s 2020 report on global ecosystems, Africa startup ecosystems occupy the bottom half of the ranking with SA at 52, Kenya dropping 10 places to 62 and Rwanda displacing Nigeria as Africa’s third-best startup ecosystem at number 65. For the city startup ecosystem rankings, no African cities were ranked in the top 100. The Report also suggests that due to the COVID economic collapse, 56% of Africa’s startups are threatened with bankruptcy. According to the report, these startups have less than 3 months of operating capital left.
Despite this disappointing news, Disrupt Africa’s annual African Tech Startups Funding Report show that African startups raised more than US$200 million in funding in January and February, but there was a sharp decline in investment once COVID hit, with less than US$60 million raised March and April. There have been some signs of recovery in the last few months, but the publication suggests funding will be harder to come by as the economic impact of COVID-19 hits investors and affects attitudes towards perceived risk. However, some investors have remained active throughout the crisis. Despite the economic slowdown, 2020 is still on course to beat last year’s record and become the best yet for investment into African tech startups, and more deals will be done over the course of the year. There are plenty of investors with funds that need to be invested, but startups have been advised to expect lesser terms.

Examples of successful funding include Mdundo, A Kenyan music service which listed its shares on the Nasdaq First North Growth Market in Denmark in a bid to solidify its leading position in the pan-African music market, following an oversubscribed pre-sale period that raised US$6.4 million. Mdundo was launched in 2013 and provides access to Africa’s favourite music to over 5 million monthly active users in 15 countries, with over 20 million monthly downloads and streams via its website and app. The company’s main markets are Kenya, Tanzania, Uganda, Nigeria and Ghana, with an increasing focus on Zambia, Zimbabwe, Mozambique, Angola, Rwanda, Cameroon, Congo, Malawi, SA and Namibia.

In Nigeria, a new financial relief facility has been launched by Ventures Platform and Acumen, with support from LoftyInc, under the new the Nigeria Impact Startup Relief Facility (NISRF) for startups affected by COVID. NISRF will provide grants of between US$5,000 and US$20,000 to support businesses which are either being adversely affected or have been forced to modify for 6 months. The facility will support impact-oriented startups that are at the post-MVP stage, are high-growth, and can demonstrate the scale of impact, amongst other criteria. The collaborating investors are inviting other investors, ecosystem players, development partners, and government institutions to also join the NISRF.

Meanwhile, Rwanda has become the latest on the continent to start working on “a Startup Act”, aimed to encourage the development of the country’s tech-based services industry. The objective is to establish an African-leading startup ecosystem. The law has been prepared by the Innovation for Policy Foundation (i4Policy). i4Policy has already helped develop similar laws in Tunisian and Senegal. In Rwanda, i4Policy plans a Policy Hackathon, The Policy Hackathon is a proven format for engaging entrepreneurial ecosystems constructively in policy reform dialogue, which will bring together important local founders and investors to ensure the Rwanda Startup Act is informed by their experiences building and growing businesses.