Africa’s reliance on foreign investors for large tech deals is due to the fact that few African private equity funds or venture capitalists are able to lead rounds of $100 million or more, a deal category sometimes called mega rounds.
Partech, for example, is one of the largest growth stage tech investors in Africa thanks to its $265 million fund, but it invests a maximum of $15 million per deal. A rare sighting of an African firm-led mega round was AfricInvest’s lead of a $100 million investment into payments company Onafriq (previously MFS Africa) in 2021, though nearly a third of that was raised as debt.
Beyond funding capacity however, African startups have also sought out top global VCs to signal ambition and validate aspirations of global reach, while tapping into the VCs’ network of other companies and investors for sales and future exit plans. While the VCs have shown interest in recent years — Softbank’s first Africa investments raised OPay and Andela into billion-dollar valuations in 2021, for example — the ongoing crunch reveals the dynamics of engagement.
“Most of these global investors retrenched and focused only on their existing portfolio, driving reduction in the pricing and volume of growth-stage deals,” Lexi Novitske, a partner at Africa-focused firm Norrsken22, told me. It is unlikely that Tiger Global or Softbank will invest in Africa in the next 12 months because those firms are now conservative, investing in “sub sectors and geographies they have an expertise in and where there is a more liquid market for big $1billion-plus exits,” said Novitske.