With 4 startups passing the $1 billion valuation line to become the first African Unicorns, the continent has been overtaken by a wave of optimism that promises to pave the way for the startups of the future.
A total of 4 companies have gained Unicorn status in recent years: Flutterwave, Interswitch, Fawry in the fintech industry, and Jumia in e-commerce. Other than Fawry, all of the startups are based in Nigeria, one of the region’s largest economies.
African startups have gotten notoriety over the years, with 9 companies making it into the exclusive Y Combinator summer batch this year.
The reasoning behind the success is the untapped potential the region represents with an increasingly mobile and tech-savvy population in an economy dominated by informal employment.
Rahul Shah, an analyst at Tellimer, referred to this potential by telling Quartz,
“For those companies that can succeed in drawing business away from informal providers, the opportunity is huge. This is where the next fintech unicorns will emerge.”
Nigeria’s success in the fintech industry has also been boosted by the ongoing Covid19 pandemic, which forced consumers in the region and around the world to socially distance ad find digital alternatives to complete payments and complete their purchases.
This was reflected by the spike in user numbers and transaction volume the 4 African Unicorns experienced.
Shah referred to this by stating:
“This is the key battleground for fintech in Africa. For those companies that can succeed in drawing business away from informal providers, the opportunity is huge. This is where the next fintech unicorns will emerge.”
The startup scene in Africa will not only be a place for innovation to take place, but also for financial inclusion and digital transformation to increase.
These opportunities will allow locals to easily integrate with the global economy and fully benefit from the Africa Continental Free Trade Area (AFCFTA) pact formed in recent years.
The success experienced by the African Unicorns has driven investor trust in the region by proving the potential the market represents.
While this interest has been largely focused on fintech and e-commerce until now, experts expect this interest to diversify in the near future.