Examining venture funding trackers in the African tech ecosystem

In Africa, access to data in most sectors is a challenge making it difficult for researchers or policymakers to make accurate decisions.

Guess what? Nigeria doesn't have an accurate estimate of its citizens. Most times, international institutions estimate these numbers which Nigeria's President, Muhammadu Buhari has described as "wild estimates" that "bear little relation to the facts on the ground."

Until 2015 when Disrupt Africa released the first African tech venture funding data, there was also a data gap in the ecosystem. Fast forward to eight years later, there are more than eight funding trackers developed by newsrooms and investors actively curating data about the tech industry on the continent.

Most of these trackers publish monthly, quarterly and annual state of funding reports. One constant thing with data-tracking on the continent is disparity due to the use of contrasting methodologies.

Alongside Benjamin Dada, Publisher and Editor-in-Chief of Bendada.com; Yinka Awosanya, Research Lead at Intelligence by Techpoint, Olanrewaju Odunowo, Head of TechCabal Insights and Margaret Ntambi, Venture Partner at Benue Capital, we examined the funding tracking landscape on the continent during this week's BD Talks.

Overview of venture funding tracking in Africa

In 2021, we launched the BD Funding Tracker to curate venture funding data on the continent. "Instead of relying on other trackers, we decided to start tracking by ourselves—with a unique methodology—to enable our reporting," Benjamin said.

With the proliferation of funding trackers across the continent, consumers might often have a hard time deciding on which data to trust. However, Yinka says the audience should use trackers with methodologies that fit the purpose of their research. "After comparing four to five methodologies, you can come to a conclusion of which one is best suited for you," he added.

For instance, while we cover all funding sizes, Partech Africa covers equity deals and funding rounds higher than $200,000 and The Big Deal tracks funding rounds from $100,000 and above. With this, a consumer who is looking for growth-stage startups can easily choose which data will be relevant to their needs.

"Considering the data gap on the continent, the existence of these various trackers is commendable. It enables consumers to compare and contrast, thereby spotting 'bad data'" Olanrewaju said. "The more data we have, the better for us but it should be reliable," Benjamin adds. "Also, the tracking process should be transparent—methodologies should be disclosed."

Collaboration or a pan-African tracking methodology?

Since every desk is tracking different things, a unified methodology is not feasible. "We will not like it if everyone is publishing the same numbers, it does not give room for comparison and contrast," Olarewaju stated.

However, to enable transparency, each tracker should publicly disclose their methodology and also stick to industry ethics.

Instead of a pan-African tracking methodology to be deployed at various newsrooms or intelligence desks, Yinka says that collaboration amongst the funding trackers to curate a single report is the possible way to give a robust report. "This kind of collaboration will even give the data more credibility," he added.

Benjamin and Olarewaju agree with this position. "This is a movement that I will want to be part of," the TechCabal Insights head said. "It makes a lot of sense," Benjamin affirms.

Should we track M&A as funding rounds?

At the end of last quarter, one of the conversations around data tracking in the ecosystem was the inclusion of mergers and acquisitions as funding rounds. In a previous article, I quoted ChatGPT's response to a prompt on this subject, it says:

"M&A is typically not considered as funding [rounds] because they do not involve the direct infusion of capital into a company."

Earlier this week during BD Talks, I brought back the question. Here's what the experts said: "In my opinion, I do not count it as funding; I see it as a synergy between two companies," Yinka said.

Although all three panellists agree that M&As should not be counted as funding rounds, Olanrewaju says that data trackers across the continent should track every piece of data on the ecosystem, including M&As, even if it is on a separate sheet.  

"Data is very crucial and it's very hard to come. So let us track everything including grants that come into the ecosystem because you might not know when it will be relevant," he added. Margaret also affirms. "It is important to track exits, it gives people an end-to-end story about the growth of startups in the ecosystem," she said.

What's an African startup?

This is one of the important questions that we asked ourselves before launching the BD Funding Tracker. For us, we defined an African startup as an Africa-founded company with Africa as its primary market in terms of operations or revenue—not based on HQ or incorporation. This means that companies founded by entrepreneurs of African descent, that are not operating on the continent are not counted.

Take Calendly for instance, the founder, Tope Awotona is of Nigerian descent, the product is also used in Africa. However, it is not an African-focused company, which is why it is not counted as an African unicorn.

"Framing what an African startup is in your methodology can make a huge impact on the funding numbers," Olanrewaju says. Just like our methodology, TechCabal Insights and Intelligence by Techpoint also define an African startup by its primary market.

Aside from location, the definition of what is a tech startup is also important.

"The subject of methodology is what will always evolve. When we started tracking, we were focused on disclosed news only because it is easy to verify," Benjamin adds. "However, as we are growing, we might start getting access to reliable undisclosed data and we will have to include it, in a way that is still transparent."

Monetisation and the way forward

According to Benjamin Dada, to enable monetisation of this data, various trackers should think of building a tangible data product that consumers are willing to subscribe to and interact with; and/or create a spectrum of raw data and/or analysed data.

Generally, consumers, especially in a B2C model are not willing to pay to access data. "We still need to figure out how to create value that people will be willing to pay, newsrooms can also improve their advertising model," Olanrewaju added.

Going forward, all the experts agreed the trackers will need to diversify their coverage of the ecosystem, beyond venture funding data. "We should look at more data points," TechCabal Insights head added.