African entrepreneurs have the potential to propel the continent as a global centre for innovation. Our tech ecosystem continues to thrive and buck global trends, with the region seeing the fastest growth in VC funding in 2022. 

The continued growth and impact of Africa’s tech ecosystem, depends on our ability to leverage key fundamental macroeconomic trends that are driving the direction of the continent. These include a population set to double in size to 2.5bn by 2050, a young population which is expected to constitute 42% of global youth by 2030, rising internet penetration which has doubled from 2017 to 2022, smartphone adoption expected to reach 87% by 2030, and middle class which has tripled in size in the last 30 years.

For our 2023 ARM Labs Lagos Techstars Accelerator, we are looking for entrepreneurs that are changing Africa and the world, by using technology, data and intelligence to serve a population growing in size, youth, income and digital access. Specifically, we will be investing in startups building solutions in (but not exclusive to) fintech, ecommerce, mobility/logistics and talent.

Fintech

Fintech continues to receive 60% of VC funding into the continent, demonstrating its potential to become a global capital of fintech innovation. Digital financial service solutions are not only enabling financial inclusion, but are providing essential infrastructure upon which businesses and economies can thrive. Significant value is delivered through this vertical, with McKinsey analysis showing that fintechs are making transactions up to 80% cheaper, interest on savings up to three times higher, and remittances up to six times cheaper than traditional players.

The continent is home to nearly half of the world’s 700million users of digital financial services, and almost two-thirds of the global value of mobile money transactions. But there is still plenty of room for growth - more than half of the population still has no access to financial services, cash is still used in around 90%, 3 out of 10 payments still fail. However, opportunities differ from market to market. E.g. while mobile payments penetration in Kenya is high, giving opportunity for innovative solutions, slow traditional banking processes and a high unbanked population in Nigeria calls for disruptions to traditional services.

Subsectors of interest include: 

• Business services and analytics

• Retail lending, digital identity and alternative KYC

• SME banking, lending and credit profiling

• Wealth management solutions

• Business as a service / financial infrastructure as a service

• Embedded finance

Ecommerce

Ecommerce is the 2nd highest sector recipient of VC funding in Africa. Driven by a continued increase in digital payment services, a booming youth population, internet penetration and the proliferation of affordable smartphones, ecommerce penetration in Africa has more than doubled in the last 5 years, from 178 million users in 2018, to 388 million in 2022. High growth is projected to at 13.5% year-on-year (2023-2027), resulting in a market volume of US$68bn in 2027.

The “first wave” of ecommerce startups which perhaps imitated western solutions, have notably struggled, facing challenges including a relatively small middle-class addressable market, challenges in logistics, and a preference for cash. However, a focus on the realities of the African consumer (e.g. a strong savings culture, in-store purchases, and social commerce) has given rise to a number of fast growing companies digitising retail distribution and offline commerce. 

Subsectors of interest include: 

• B2B ecommerce

• Social commerce

• Market places / Storefronts

• Digitising offline commerce

• Ecommerce-as-a-service

Mobility & Logistics

Economic activity is highly reliant on the efficient movement of people and goods - this dependence is increasing with population growth, urbanisation, and rising commerce. From trade and ecommerce, FMCG and agriculture, education and healthcare, political participation and social engagement - all sectors of life and business rely on reliable systems for logistics and mobility. 

The sector received the third highest percentage of VC funding into Africa in 2022. 

Harnessing technology unleashes opportunities to increase efficiency, lower costs, and increase productivity for a sector that faces challenges such as poor road infrastructure, insecurity, fragmented supply chains, and restrictive tax policies. The rising global focus on climate policy and clean solutions also means that innovations which enable and promote sustainable solutions are likely to receive growing attention.

Subsectors of interest include: 

• Mobility

• B2B logistics

• Last mile delivery

• Warehousing and fulfilment

• Logistics as a service

• Order & Inventory Management

• Sustainability

Talent Tech

Africa’s booming youth population means that the working-age population is set to increase from 370mn adults in 2010 to over 600mn in 2030. However, nearly half of young people in Africa are unemployed, 83% of the employment is informal, and incomes fluctuate with few if any benefits. Globalisation, remote working and the rise of the gig economy are also changing the nature of how and where work is performed. Solutions which increase the capacity and productivity of Africa’s growing workforce are essential to fully leverage the continent’s demographic dividend, and ensure a boost in growth and prosperity.

In Edtech, innovative solutions providing solutions such as educational entertainment, school management software, and affordable learning materials have the potential to increase access to quality education. Whilst for Africa’s workforce, solutions designed to improve HR management, supporting the growing and globalised gig-worker economy, and tools to increase employee financial health and productivity are emerging.

Subsectors of interest include: 

• Edtech

• HR tech

• Employee financial health

• Future of work / Gig-worker services

The opportunities for tech in Africa are endless, and we welcome startups outside of these sectors. If you or someone you know is building the future of innovation that has the potential to change Africa and the world, please encourage them to apply to ARM Labs Lagos Techstars Accelerator, or get in touch at oyin.solebo@techstars.com.

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