A Naspers Foundry investment of R42m in a Cape Town tech start-up this month was further evidence of a venture capital (VC) boom for tech start-ups across Africa.
The investment in mobility technology company WhereIsMyTransport was part of a $14.5m (about R204m) funding round led by Naspers Foundry, Cathay AfricInvest Innovation Fund and SBI Investment.
It came just a week after three-year-old Nigerian start-up Chipper Cash, which facilitates cross-border payments in Africa, closed a $100m series-C round, which valued the company at $1bn - making it Africa's latest tech unicorn. Its previous funding injections include $30m raised in November last year in a round led by Ribbit Capital and the Jeff Bezos fund, Bezos Expeditions.
Chipper Cash offers mobile-based, no-fee payment services in a number of countries, including SA and Kenya, and intends to grow its 200-strong workforce by 50% this year.
The investments solidify the arrival of VC as a serious factor in the tech space in SA and across the continent, overturning the general view of two or three years ago that VC in the region was mostly private equity in disguise. The prospect of it creating more unicorns has suddenly become very real, says Tefo Mohapi, CEO of iAfrikan Media.
$1bn
The value of three year-old Nigerian start-up Chipper
"Although I have my reservations with the need for tech start-ups to achieve unicorn status - it is an obsession with an arbitrary number - I think that Africa's unicorns will come from three industries in the next five years: fintech, e-commerce and digital marketplaces, and transportation and logistics.
"For our continent, these three industries are key to enabling commerce and ensuring Africa's economy turns," Mohapi says.
"The concept behind digital technologies and, by extension, the services and products tech start-ups offer, is to take what is available offline and make it available in digital format online.
"This makes it important that certain infrastructure, such as telecommunications, be in place before tech start-ups can even start operating," he says.
"Given that Africa's start-up ecosystem, in general, is in its infancy, the early unicorns are likely to be those companies that are 'building the railings' to enable other parts of commerce and society to operate and build on top of them."
WhereIsMyTransport is a perfect example. It maps formal and informal public transport networks to improve the user's experience and make the general commute more reliable in highly populated megacities.
"We've delivered on a consistent mission and purpose while increasing our global footprint," WhereIsMyTransport founder and CEO Devin de Vries tells Business Times.
"While we see support from our international base of investors - spanning Japan to the US - as an affirmation of the potential of mobility data in emerging markets, acknowledgment from one of Africa's biggest corporate venture brands means a lot.
"Naspers is a world-renowned brand. It is a great acknowledgment to draw capital from such a rigorous investor," De Vries says. "The Naspers portfolio speaks for itself, and is a real testament to local entrepreneurialism."
The WhereIsMyTransport model aligns with a comment in 2015 by Uri Levine, Israeli co-founder of Waze, who said of Silicon Valley's obsession with opportunity rather than need: "The objective is not becoming a unicorn, but solving a big problem."
De Vries says his company's vision has evolved substantially.
"There's typically a lot of crossover between need and opportunity. Those travelling by car in developed markets have benefited from a wealth of innovation, but that's yet to occur on the same scale for public transport users in emerging markets. That's certainly a need, and a great opportunity too," he says.
"WhereIsMyTransport has proven to be the ideal data partner for harnessing that opportunity. We've mastered our specialism of mobility data production in emerging markets, building an adaptability to the hyperlocal context of each city we work in.
"Public transport varies by market, and we've helped our partners solve the problem of acquiring accurate mobility data in each city where we work," De Vries says.
"Mobility data underpins everything we do, but the core foundation of our ambition is delivering something that meets a global need."
The Naspers-led investment will help WhereIsMyTransport expand rapidly.
"We're progressing our commitment to digitalise public transport network information in the world's 30 largest emerging-market cities by 2023.
"Of those, we're active in Mexico City, Gauteng, Dhaka, Bangkok and Lima today. We recently launched our Android app Rumbo in Mexico City and Lima."
Clive Butkow, CEO of Kalon Venture Partners, which has led the use of the section 12J tax incentive in funding tech start-ups, says the South African tech start-up space is looking healthier than it has ever been, "with the cost of capital and the amount of capital required to start a tech business coming down dramatically".
While the Cape Town scene seems to be the most advanced, he says, Johannesburg is now a close second.
So far, he says, Kalon has raised a few hundred million rands, and its first fund is fully deployed. Among other investments, in the past three months it boosted its stake in cybersecurity start-up Sendmarc.
"Cybersecurity is not only a technical issue but a business one," he says. "Sendmarc solved one significant aspect of cybersecurity . by preventing phishing and spoofing. Most organisations in South Africa are not protected from a stranger sending a fraudulent e-mail from their business e-mail address. Sendmarc prevents this from taking place with its security protocol."
Knife Capital follows a similar VC strategy as Kalon, having launched its first section 12J-focused vehicle in 2016, with a second launched last year.
This year, it is raising a new $50m fund to invest in the aggressive expansion of South African "breakout companies that achieved a product/market fit, thereby filling a critical follow-on funding gap".
"The start-ups are doing their bit," says Knife Capital co-founder and partner Keet van Zyl.
"It is the rest of the ecosystem that lets them down: follow-on funding availability, regulatory hurdles, market access opportunities and the like. But there is a lot of momentum - more international funders are looking at this space; larger funding rounds are being raised; there are increased co-investments; and exits are not so scarce anymore."
Knife has had several stellar successes, including exits from Uber Eats and Fundamo - bought by Visa - worth a total of $110m, and current investments in artificial intelligence start-up DataProphet and edtech firm Snapplify are shaping up well.
"We are currently finalising the legals on two investments; we are in advanced due diligence on another three and in early due diligence with two," Van Zyl says.
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