Endeavor Report: Africa’s Technology Ecosystem is set for Rapid Growth

According to new research released by Endeavor Nigeria, the country’s premier network of high-impact entrepreneurs, Africa’s digital ecosystem is poised for exponential growth, fueled by strong market fundamentals and the impact of the COVID-19 epidemic.

“The Inflection Point: Africa’s Digital Economy Is Poised To Take Off,” a report by Endeavor, reviewed key events in Africa’s technology ecosystem over the last few years, identified patterns (especially in the context of other technology ecosystems around the world), and provided a roadmap for successfully navigating the emerging opportunities.

Africa’s digital economy is entering its S-curve, a phase of rapid, considerable growth that will positively impact the continent’s GDP, job creation, and general economic outlook, according to the paper, which drew on several sources, including McKinsey & Company studies.

With an estimated market size of $115 billion, Africa’s digital economy is vast and rising, with a projected market size of $712 billion by 2050. Africa will have a third of the world’s young people by 2050, and the continent is urbanizing faster than the rest of the globe. In addition, by 2025, Africa will account for one out of every six internet users on the planet.

The COVID-19 epidemic is also accelerating digitalisation on the African continent, enabling more Africans to participate in online activities. As a result of these developments, more investors are taking notice of Africa’s technological potential. Funding for African digital companies grew 2x faster than global rates between January 2020 and December 2021. With the rise of mega-rounds, liquidity events, and unicorns, proven exit avenues are emerging for early investors.

The confluence of these events has set the stage for Africa’s technological landscape to flourish. However, there is still a ‘white space’ to consider for investors.

Due to the large number of deals in the 1-5 million USD range (600) compared to the 5-50 million USD range (150) in the previous year, it is unlikely that there will be enough supply in the market as companies in the 1-5 million USD range graduate to larger ticket sizes. The existing excess of innovation may be more effectively utilized to promote even more development and prosperity on the continent with the correct financial backing.

“The data gathered in this research is obvious – Africa is the next digital development frontier,” Tosin Faniro-Dada, CEO and Managing Director of Endeavor Nigeria, said in response to the report. The impact of the COVID-19 pandemic on behavior, in combination with our young and digitally knowledgeable population, an increasing technology ecosystem, and the influence of the COVID-19 pandemic on behavior, is destined to cause a tipping point in our digitization journey. We’ve been encouraged by the rising amounts of investment that our entrepreneurs have received, but we want to make it even easier for more investors to open their checkbooks and help catalyze the growth that we believe is imminent.”

“We’ve seen a few eye-catching fundraising rounds and acquisitions in Africa’s digital ecosystem in recent years,” Topsy Kola-Oyeneyin, Partner at McKinsey & Company, said, “but the findings of this analysis imply that we barely scraped the surface.” Informality and fragmentation continue to underpin a variety of sectors across the continent, limiting product and service availability and pricing. These disruptive opportunities abound across the continent, and this research will make it easier for interested investors to alter their business models to take advantage of them.”