Fintech Vs Agritech What Should Investors Hurdle Toward in Nigeria? (Part II)

 

This article is a continuation of a series, you can check out the first post here

In the last few years, African start-ups have successfully raised capital from angel investors both within and outside the continent. In 2015 about a $185M was raised in total, with Fintech bagging about 29.6% of this funding which is about $49.7M, while Agritechs raised about $50k in funding. Reported investments in Start-ups in Nigeria have increased to $49M in 2015 compared to $16M in 2014. Interestingly, Nigeria, which had the highest investment focus (about $109.3M), accounted for 29% of the total investments in African start-ups. In 2016, 146 African start-ups raised $129.1M with about 24% equalling $31.4M going to the Fintech sector according to Disrupt Africa’s tech Start-ups Funding Report.

 

Fintech

Fintechs have been by far the most funded start-ups since tracking began. In 2017 a third of all the funding to the Nigerian tech ecosystem went to Fintechs and this proportion has remained stable in the last three years, so it is safe to say that Fintech is worth a third of the entire tech ecosystem. Investments in Fintech in Nigeria and other parts of Africa have moved from about $198M in 2014, to $800M currently. Though global investments in Fintech were put at $19B in 2015, indications have shown that investors are increasingly attracted to the industry’s potential to tap into Africa’s huge unserved/underserved population. KPMG states that investment in Nigerian Fintech over the last two years exceeded the $200M mark with $195M being invested in 2017 alone. Nigeria, Egypt and South Africa were the top three recipients of Fintech investments in Africa over the last two years. This is even as start-ups are increasingly accounting for a significant portion of Fintech investments, accounting for 30 per cent of the total funding raised by African tech businesses in 2015. KPMG observed that Venture Capitalist/Angel investors were early-stage investors in Fintech businesses in Nigeria in line with global trends. It, however, said Nigerian banks, which had previously invested in Fintech start-ups such as Interswitch and Valucard are now predominantly consumers.  In the Tech start-up funding report for 2017 released by Disrupt Africa Fintech was the most attractive sector for investors. The high investment in Fintech start-ups is really something noteworthy because banking penetration is low. In 2014, the number of bank accounts relative to population was 34% in Africa.

For the past two years, the total investment in Agritech in Africa has amounted to $19M. With nearly one billion people in Africa active as smallholder farmers, it comes as no surprise that entrepreneurs and investors alike are starting to tap into the Agritech space. This space is charting out a decidedly upward trajectory, with funding into this sector growing 203 per cent in 2017. Agritech start-ups across the continent raised a combined total of US$13.2M in funding last year, the fourth largest of any sector. This was up 203 per cent on 2016 figures, which had in turn been an increase of 8,660 per cent on the pitiful of US$50K raised by Agritech start-ups in 2015. Agritech is hot right now internationally, and Africa is no exception. Investment tends to be Marco economically stable, people have to eat, and there are a number of acquirers perusing the space lately looking for opportunities.

This level of investment is confirmation that Agritech has become a key sector of interest not just for venture capital investors, but also for impact investors, individuals, family offices, institutions, and strategic players. Some high-profile investors include the Bill & Melinda Gates Foundation, which invested across biological inputs and alternative proteins, Google, actress Demi Moore, actor Jared Leto, Stanford University, and the University of Texas Investment Management Company. The corporate venture arms of big agribusiness also stepped up their participation in 2015 with Monsanto and Syngenta leading the way.