What’s behind Africa’s fundraising growth?

We’ve all seen the numbers. $4.9 billion. $1 million raised every two hours. 250% growth. Africa’s venture ecosystem is accelerating faster than the global market — but is the boom just hype? What’s behind this ‘sudden’ increase in startup funding on the continent?

The inflection point

Like all overnight successes, momentum has been building for years. And, much like startups themselves, ecosystem growth tends to be exponential. Looking at global startup ecosystem trajectories, there is good reason to believe that 2021’s numbers are not an isolated performance.

India had eight unicorns in 2018, nine in 2019, and 11 in 2020. Last year, the country celebrated 42. Similarly, it took China five years to reach five unicorns between 2010 and 2015, but then saw 21 unicorns in 2016 — and 91 unicorns in 2019. Latin America has followed a similar trajectory, raising $14.8 billion in 2021 — more than it had raised between 2014–2020 combined — and minting nine of the region’s 17 unicorns.

The pattern is clear: raising unicorns is not a linear process. After a critical mass of scaled startups, there is an inflection point that marks the beginning of exponential startup ecosystem growth and success.

Ecosystem multiplier effects

What creates this compounding momentum? Essentially, early successes breed future success by de-risking the ecosystem and establishing startups as a viable option for investors, corporate clients, and talent.

For a long time, investors were hesitant to put money into early-stage startups in Africa. Political and macroeconomic concerns acknowledged, there was no assurance that Africa could produce billion-dollar businesses, and that investors taking on early-stage risk would get their money out. To believe in unicorns, most investors need to see unicorns. By the end of 2020, there were enough mega-deals to instill confidence that the venture capital model could work on the continent.

It’s not only investors who believe it. Founders, who might have opted for the safety of a job, instead choose to pursue their game-changing idea. The accepted narrative around entrepreneurship and failure shifts, and new founders benefit from a network…