Chapter54: Why the African tech market is a hotbed of expansion potential

African tech market

As little as five years ago, the thought of Africa becoming a place in which international tech giants would inject large amounts of capital, where unicorns and “soonicorns” could grow and flourish, and where talent would be not only in hot demand, but flocking to the action, was almost unimaginable.

In the current day, however, Africa is a veritable playground of tech innovation activity.

Take the story of fintech scaleup Stripe. Picking up $600m (£445m) of funding in early 2020, the US-based company swiftly made its biggest acquisition to date with Paystack, a Nigerian payment-processing startup that already has over 60,000 corporate clients.

Despite the deal representing the largest startup acquisition to ever come out of Nigeria, it is no anomaly. Nor is the US alone in its penchant for Africa.

Just a few months later, DiDi Global, China’s answer to Uber, spotted South Africa as a launchpad for its African ambitions. It later piloted its ride-hailing app in Cape Town, and officially kicked off operations in the city, with over 2,000 drivers and 20,000 local users downloading the app in its first two months.

A burgeoning playground for home-grown success

From acquisitions we turn to local players, and it is important to note here the diversity of profiles seen in Africa’s home-grown unicorns, both in terms of location and in terms of sector.

Thinking of Africa, we often picture its unbanked masses (over 50% of the population) and are perhaps too quick to assume that fintech is one of the very few sectors that may see unrivalled success here. Fawry, Egypt’s first electronic payments company to be valued at over $1bn, is an obvious illustration.

While it is true that in 2020 fintech dominated the investment space, gaining 25% of the total capital raised in Africa, the 2020 Partech Africa Report also shows that there are six main verticals that attracted over $100m (£74m) in equity funding in 2020, and plenty more that secured smaller amounts of funding.

So, the reality of African potential is far from simple fintech furore. To name some examples, ecommerce company Jumia, the so-called “Amazon of Africa” was the first-ever entity from the continent to list on the New York Stock Exchange in 2019. And Andela, the Softbank-backed information technology company that helps tech companies build remote engineering teams, hit unicorn status with a $200m (£148m) Series E raise in late 2021. There is a huge opportunity for placing bets on the African market, no matter the sector.

Not just simple potential but proven and persistent promise

Yet, this phrase “placing bets” is rarely used when referring to expansion or investment in European or Asian markets, where the tone is more one of absolute surety and confidence. This should no longer be so, when the rationale behind current African activity comes from proven trends that are undeniably here to stay.

According to GSMA, smartphone penetration already rose from 44% to 48% between 2019 and 2020 alone, and this number is set to rapidly increase to 64% by 2025. This smartphone adoption has been heavily bolstered by the decline in their average selling price, following the introduction of <$100 devices, in itself aided by the emergence of local factories and assembly lines.

Money leads to mobiles and vice versa, as we see with the huge uptake of mobile money services in Africa. GSMA also shows us that over half of Africa’s population will be users of mobile money by 2025, and $155bn (£115bn) of economic value will be generated by mobile technologies in the same time period.

Technological connectivity is then converging with Africa’s incredible rates of urbanisation (with 21 of the 54 countries experiencing urbanization rates of over 50%), and with its booming population (almost 60% of which is under the age of 25) to create undeniable opportunity for success.

Financial investment and expansion in Africa are far from being a stab in the dark anymore. The continent has emerged as a fast-growing tech ecosystem and one in which it is more than worth launching activities.

Ready to launch into the African tech market?

While the case is made for the attraction of Africa, knowing where to start with operations is often a little more difficult. This is where Chapter54 steps in.

Chapter54 is the new accelerator powered by Partech Shaker (the innovation branch of global VC firm Partech), which is looking to help European tech scaleups break into the African market.

At Chapter54, we think that tech can help (and already is working to!) solve a lot of challenges that Africa faces in terms of education, financial inclusion, health, and mobility. European tech companies could have a huge role to play in this story, especially if they are well-adapted and tweak their operating models to Africa’s demands.

The accelerator boasts a large and curated network of mentors and speakers, all C-levels hailing from some of Africa’s biggest names in tech such as Glovo, Opay and Flutterwave, to name but a few. Each of these partners will harness their experience in the market to help selected companies refine their operational models, construct solid expansion roadmaps, and align their plans with the local context.

With a selection of soft-landing solutions thanks to partnerships forged with innovation players on the continent, and a unique catalogue of perks selected to aid market entry, Chapter54 is perfectly poised to power the next generation of African tech leaders to success.

For interested companies, these are the milestones to keep in mind:

February 7th, 2022: Applications open

March 5th, 2022: Applications close

March 9th, 2022: Unveiling of the chosen scaleups

April 2022: Start of the acceleration journey

This article is in partnership with Partech Shaker, the innovation branch of global VC firm Partech.

Chapter54 is Partech Shaker’s acceleration programme for European scaleups looking to expand into African markets. To find out more you can watch a short video explainer here.