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Sixty-five African startups exceed $50mln valuation, become scaleups (report)

Friday, 29 September 2023 19:21
Sixty-five African startups exceed $50mln valuation, become scaleups (report)

(Ecofin Agency) - Sixty-five startups in Africa have now reached the status of scale-ups, having exceeded a valuation of $50 million, according to a report issued on September 21 by Startup Genome. The report emphasizes that a scale-up is an intermediate level between startups and unicorns, which are companies with a valuation over $1 billion.

Usually, a startup achieves this level only after solidifying its business model and undergoing rapid changes in various aspects, including substantial growth, significant fundraising, a broad customer base, global expansion, talent attraction, and the establishment of new business, technical, or financial partnerships. Based on these characteristics, Startup Genome found that most scale-ups in Africa are concentrated in four countries with well-established tech ecosystems: Nigeria, South Africa, Kenya, and Egypt.

With 14 scale-ups each, Nigeria and South Africa are tied for 35th place worldwide in the ranking of countries with the highest number of such startups experiencing significant growth. These two leading African economic powers are closely followed by Kenya, ranking 36th globally with 11 scale-ups. Egypt follows, ranking 47th with 6 scale-ups.

Globally, the report counts 12,400 scale-ups, with 80% of them located in five countries: the United States (7,184 scale-ups), China (1,491), the UK (623), India (429), and Canada (269).

By sectors, the majority of scale-ups are found in biopharmaceuticals, financial technologies, marketing, and transportation. According to Startup Genome, the first factor that can propel a startup to the next level is the founder. One-third of the scale-ups listed worldwide were created by "serial founders" who become increasingly efficient as their projects progress.

Similarly, founders with previous experience in hyper-growth are more likely to transform their startups into scale-ups than those without such experience. Founders who rely on friends for funding are also more likely to turn their startups into scale-ups than those who depend on their own or their family's financial resources.

Connecting to international business networks (peers, networks of influence, coaching structures, advisors, etc.) also increases the chances of achieving scale-up status. Startups that develop a high level of global connectivity are 3.25 times more likely to scale up than those with low connectivity, the report found.

Last but not least, the report suggests that founders wishing to improve their chances of scalability should offer stock options to all their employees.

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ECOFIN AGENCY offers a selection of articles translated from AGENCE ECOFIN. Founded in 2011, Agence Ecofin is a leader in Francophone Pan-African economic news, particularly in West and Central Africa. The agency publishes daily news on nine African economic sectors: Public Management, Finance, ICT, Agribusiness, Energy, Mining, Transport & Logistics, Communication, and Training.

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