Venture capital investors cannot ignore Africa, the world’s youngest continent. It is set to grow, and this growth will foster entrepreneurs and new businesses for years to come.
Historically VC investors in North America and Europe, have invested in tech companies across sectors – including PropTech businesses. But Africa has battled to attract the same attention.
Will Harris, the CEO of Gmaven, a data-driven CRE PropTech, says VC investors have been wary of Africa. Their rationale appears to counteract Africa’s improving fundamentals for investment. The continent is projecting 80% population growth in the next three decades. In 2022, Africa’s population sits at roughly 1.4-billion people as does India’s. The Asian country is the second-[H1] most populous in the world. But by 2050, so in just short of 30 years, Africa’s population is estimated to rise to 2.5-billion. Africans will be an even larger and more important player in the world economy.
This is why pioneers such as Y Combinator, the American technology start-up accelerator is looking at Africa, and why the entrance of other pioneering tech investors seems imminent.
Africans are studying at technology universities across the world and then returning to their home countries to start businesses. These people are skilled and can work with local talent – from systems architects, marketers, quality assurance professionals, to customer success personnel. This requires VC funding – the fuel they require to build infrastructure and speed up development on user-requested features. This will deliver more valuable and viable products to customers, resulting in revenue growth.
The solve is for VCs to take the plunge and invest in African PropTech, inspiring others to follow suit. Crunchbase shows that globally the ratio of PropTech to total VC funding averages out at a disappointing 5%. This means that for every $1m in VC funding, globally, $50 000 goes to PropTech.
Harris explains that, since 2019, African PropTech’s ratio has hovered between 0.3% and 0.6% of total VC funding, significantly less than the global 5% benchmark.
With $4.3bn VC funding raised in 2021 for Africa, only $13.8m, or 0.3% of the total, flowed to PropTech. The 2021 shortfall is $202.4m. That’s a lot of pent-up capital.
Alternatively, using an approximate African commercial real estate value of $600bn as a guide, and leaning on global ratios, one would expect $1,056m of VC funding to have flowed into Africa over the past three years. Instead, we have seen just $29.9m flow.
But things can pick up. Harris says African PropTech VC funding is awakening. Global tech accelerators are moving into African PropTech with purpose. Look at how MetaProp’s accelerator has signed up Estate Intel and Spleet. Rent Small Small is with Techstars Toronto, while Red Swan CRE has made it to Aldar’s program. These Proptech companies all hail from Nigeria.
ARM Labs’ Techstars Accelerator program has recently launched in Lagos with the intention of investing in early-stage fintech and PropTech companies based in Africa. Up to twelve start-ups will be selected on an annual basis, and will have access to their network.
The African property market seems destined to grow, and to grow quickly, as savvy investors devise ways to profit off tech making real estate processes simpler, more efficient and quicker.