The agricultural fintech space in Africa received the least venture capital funding of any region in the world in 2021, with North America and India leading the world with respective totals of $650 million and $411 million.
But the continent has seen a steady increase in investment over the past few years, underscoring the growing importance of its agri-fintech sector, according to a recent report by consultancy Graze.
Agrifintech’s investments in Africa barely reached $1 million in 2019. They soared to $10 million in 2020 and $75 million in 2021, the report said. The annual number of agrofintech transactions also increased to 16 in 2021, from three in 2019 and 2020.
In general, investors remained nervous about agriculture as it is considered a high-risk sector, said Graze founder Niall Haughey. APN.
He thinks the recent surge in deals in Africa could help put agrifintech on investors’ radars, especially in countries where startups don’t have an investor community to turn to.
“It’s really positive that there have been a lot more transactions, regardless of the dollars invested. I think that’s really good because it basically gets more investors into the sector,” he says.
“Hopefully with some of the biggest fundraisers, you’ll start to see the emergence of an agrifintech category that people are specifically looking for. One of [Graze’s] many of the goals of spreading this term “agrifintech” are for investors to see it differently and to be able to see the fintech element. This would be particularly relevant for regions like Africa, where fintech is already so popular. [with investors] but agritech is not.
Of the $75m raised by African agfintech companies in 2021, the lion’s share went to Twiga Food’s $50m Series C, followed by SunCulture’s $14m Series A.
Other report highlights:
- Agrifintech’s investments globally accounted for approximately 1% of the $600 billion in global venture capital investments in 2021.
- Overall, online farmer and agribusiness marketplaces dominated global agrifintech stakes, completing 64 deals. Next came startups offering farmer finance data products, which landed almost half the number of deals.
- 2021 saw 93 deals compared to 39 deals the previous year.
- Early-stage transactions (seed and pre-seed) dominated.
- India leads in terms of number of agrofintech deals, registering 28 deals in 2021.
- Africa’s 16 agreements matched Europe’s. For a market of its size and wealth with a well-developed agriculture industry, Europe has underperformed when it comes to agrifintech investments, according to Graze. Compared to North America, which saw $650 million invested in 2021, Europe raised $124 million.
“It’s such a big market and because that investment is so small, it really needs to be separated to analyze what’s going on there. I think it just doesn’t sound interesting to entrepreneurs,” says Haughey.