Technological advancements and innovation are driving human evolution. In the next 10 to 20 years, I believe the digital economy, AI and Web3 revolution will impact every aspect of our lives, such as food production and consumption, goods production, payment methods, learning methods and healthcare.
We are in the midst of the unique business opportunity of our lifetime. I think our successors will not forgive us if we do not take advantage of this opportunity.
The digital revolution has often been driven by young entrepreneurs. Novel technology and business models are developed as a result of their innovative ideas, making it possible for us to resolve major challenges that humanity faces, such as climate change, healthcare problems, food shortage and wealth and financial instability.
In the 1960s, many African countries began to grow their economies by investing in manufacturing sectors. Eventually, we saw the creation of spin-offs in software and electronics. Over time, these spin-offs grew into profitable industries that generated revenue for African nations. Some people now refer to these industries as “the next Silicon Valley.” Essentially, west-African regions have a lot of potential to rival their American counterparts.
I have met with many African entrepreneurs and high-tech leaders while serving on the board of a nonprofit organization on a mission to promote innovation, leadership and cooperation in Africa and beyond. It impresses me how motivated, creative and dedicated they are.
Globally, African entrepreneurs have taken a leading role in recent years. In its 2022 Technology Pioneers list, the World Economic Forum (WEF) named six African startups—companies that are shaping industries from healthcare to retail and many other fields.
Based on the African Private Capital Activity Report, private capital fundraising reached record levels of US$4.4 billion in 2021, an increase of 63% over the annual fundraising average of $2.7 billion from 2016 to 2020. In total, Partech found 681 equity rounds were raised by 640 startups. However, the distribution of VC deals in Africa is not equal across regions. By volume, West Africa attracted the most VC deals in 2021, while by value, multi-regional deals dominated. According to the Venture Capital in Africa Report, West Africa attracted the highest volume of VC deals in Africa (33%) in 2021. A remarkable 23% of all early-stage VC investments went to Nigeria. At the same time, “East, North and Southern Africa each accounted for an equal proportion of deal value last year, drawing 20% of the total deal volume respectively.”
In spite of global inflation and a macroeconomic environment that discourages investments, Africa’s venture capital ecosystem remained bullish in the first half of 2022. There were 445 venture capital deals (to 300 unique companies), setting another record with over $3.5 billion raised. Additionally, it is predicted that VC deals will reach $7 billion by 2023.
Startups raise money in a variety of industries, with financials, IT, consumer discretionary and communication services being the most active. According to the Venture Capital in Africa Report, the financial sector dominates fundraising deals with about 32% in volume, leaving information technology in second place with 16%. Despite its importance, healthcare attracts only 4% of the investment.
Until about six years ago, Africa had no unicorn startups, meaning startups valued at over one billion dollars. Today, the continent is home to seven startupsworth over $1 billion. In 2021, four African startups achieved unicorn status.
In order for Africa to fully utilize its business potential, however, there are many challenges to overcome. It is estimated that 70% of African startups lack access to talent and capital to grow their businesses. The proportion of female-founded startups in the first half of 2022 was only 27%, and investors based in Africa accounted for 29% of total investments. Building a diverse startup ecosystem at home is crucial to maintaining growth momentum and intensifying the technological and digital revolution. African VC firms, accelerators, entrepreneurial support programs and grants from government and nonprofit organizations should comprise this ecosystem.
Startup accelerators have a special role in the startup ecosystem. Through intensive learning and trying, entrepreneurial talent is realized here. According to the Venture Capital in Africa Report, the startup landscape currently had only 6% of activity from business incubators and accelerators.
Corporate venture capital is another aspect of the startup ecosystem. Investing in or acquiring promising startups that fit their business model is the way some international corporations are cementing their presence in Africa. As of 2018, there were, however, over 400 African corporations that generated more than $1 billion in revenue each year. Partnerships with these corporations represent a huge opportunity for African startups to grow.
To transform all this incredible human and business potential into a world-leading technological hub, I suggest African business leaders and entrepreneurs collaborate harmoniously with governments, venture capitalists and startup accelerators. Entrepreneurs should build a culture and values around their startups and develop a leadership mindset and skills that eventually attracts investors and strategic partners.
Successful leadership is not only about handling opportunities and challenges but also about continuously learning and sharing experiences and knowledge. Creating an inspiring vision, setting a measurable goal and empowering people to achieve it is what make a successful business work. Our united efforts can make the continent a global hub for innovation, technology and humanity.
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Dr. Leon Eisen is an inventor, entrepreneur, board member of the Global Africa Leadership Council, WBAF Senator and Oxitone Medical founder. Read Leon Eisen’s full executive profile here.