South African VC – lies, damned lies and statistics (and exchange controls and other red tape…)


Report: Over $185m invested in Africa’s tech startups in 2015

I can’t recall where I first read this Ventureburn article, whether it was from the Twitter timeline of Ventureburn (@Ventureburn) itself, The Silicon Cape (@siliconcape) or even (@SAVCA_news). Perhaps it was even from another Twitter feed. It doesn’t really matter, as either way the report was handled pretty much the same way.

The initial report was published by Disrupt Africa – “Disrupt Africa is a one-stop-shop for all news, information and commentary pertaining to the continent’s tech startup – and investment – ecosystem”

It was picked up by Ventureburn, Silicon Cape and others (for example here) because it does have a nice, positive side to it. $188m (not $185m, to be picky) invested in tech startups in a continent such as Africa should make headlines, for all the right reasons. But this is peanuts when compared to total global VC funding, which was $128bn in 2015 according to this CBInsights Report. Admittedly that’s all of “VC” and not just “tech”, but I’m sure however the definitions are sliced the African piece of the pie will be very small indeed.

What is of interest, however, is that all of them reported along similar lines:

  • Ventureburn

“[The report] found that 125 tech startups secured a total of US$185 785 500 during the course of 2015. To little surprise, South Africa, Nigeria, and Kenya made up the bulk of the overall figure.

In South Africa, 45 startups raised funding, 36% of the overall total. An estimated 24% of deal value was recorded in Nigeria, while Kenya made up 14.4%. Other investor hotspots include Egypt, Ghana, and Tanzania.

Though the total value of South African deals was found to make up 29% of the overall value, Tom Jackson from Disrupt Africa tells Ventureburn that the startups raised less funding each, compared to Nigeria and Kenya.

“The average of just over US$1.2 million [per startup funding round in South Africa] was below the average amounts in Nigeria, Kenya and Tanzania,” Jackson points out.”

  • Silicon Cape

Silicon Cape reported on it by Tweeting a link to Disrupt Africa’s own article: Could 2016 be the best year yet for SA startup funding?

And it said – “Last year was already a very good year for South African startups in terms of funding, with businesses from the country proving the most attractive to investors.

According to the findings of the Disrupt Africa African Tech Startups Funding Report 2015, 36 per cent of African startups that raised funding in 2015 were based in South Africa, with companies taking home in excess of US$54.5 million over the course of the year…”

But on to the provocative nature of my title

Borrowing from what is, rightly or wrongly, attributed to Mark Twain, I wanted to make the point about statistics and what they tell you (or not). Now don’t get me wrong, I am not making a point here against any person or entity mentioned in this post. Also, I found the report worth the money and I hope Disrupt Africa continue their good work.

But what I did do, because I was intrigued and because I wanted to dig into the research, was buy a copy of the report ($50, look at their website). I don’t want to give too much information away, because that is unfair on Disrupt Africa. But have a look at this:

I found an eensy, weensy little fact that was disclosed in the report but that wasn’t picked up in any of the articles that I read:

Of the $54.6m attributed to South Africa (29% of the $187.8m), $26.7m belongs to just one (1) deal – an investment by Investec into WiGroup in August. Almost 50% of the funding attributable to South African companies. Strip that out and compare where SA sits:

  • Nigeria ($49.4m)
  • Kenya ($47.4m
  • Tanzania ($25.4m)
  • and the rest…

And guess what – the average deal size in South Africa including the WiGroup transaction was $1.2m. Below the continental average as well as Nigeria and Kenya. Exclude the WiGroup deal and the South African deal average drops below even Egypt’s!


Well, I’ve written about my take on the SA VC scene before. We have a limited pool of SA angel and VC investors. Simple as a foundation.

But, and here’s the important bit – for as much good as initiatives like Silicon Cape and others are achieving, regulatory uncertainty in South Africa is the real headwind, with South African exchange controls the final, and permanent, it seems, nail in the coffin.

This is what we see, hear and read about. Every day:

    • Do you know how difficult (impossible) it is to export South African developed IP offshore? Try it and see…
  • South African investors WANT TO GET AS MUCH OF THEIR WEALTH AND IP OFFSHORE FOR THE SAME REASON. Legitimately and within regulations, of course. But believe me when I tell you they are doing it

What does all this boil to? People (largely) do not want to invest in this country until there is regulatory certainty.

The stats and data contained in the Disrupt Africa report tell the story. For heaven’s sake, when a country as large (relative) as South Africa attracts less start up $ per deal than Egypt which has been through such a difficult time recently, surely this says something.

Is anyone listening?

(I normally end my posts with a “Carpe diem”, but I can’t on this one…)

About vcmaven

I am an experienced investment banker. I provide investment banking advice and access to funding to companies and entrepreneurs
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