ICT Sector Leading the VC Investment Charge – According to the SAVCA 2024 Survey
According to the Annual SAVCA VC survey for 2024, the performance of the venture capital (VC) sector defied the downward trend in annual deals that had been prevalent since 2020, with the local information and communication technology (ICT) capturing investor interest and confirming the ICT sector’s position as a frontrunner in economic development and innovation.
Speaking at the launch was SAVCA CEO, Tshepiso Kobile, shared her ongoing conviction that the VC industry must continue to play a pivotal role in supporting high-growth startups and early-stage businesses, whilst also enabling innovative solutions said, “When we launched this survey in 2010, we opened with the question: ‘is there opportunity for VC in South Africa?’
“The need to continuously reflect on this question and keep a close eye on the development of the sector is why research like the VC survey is so critical. Today, equipped with the most recent data, I am proud to answer that yes, VC is alive and on a positive trajectory in South Africa – both in terms of active and sizeable deals,” she stated.
The state of VC in South Africa
This year saw total capital flow to startups reach over R3 billion for the first time since the launch of the survey 14 years ago. Activity by number of deals has remained stable, with a slight decrease in 2023 as the number of entities receiving funding slowed down, with more investments going into the same companies.
Notwithstanding the decrease in number of deals in 2023 (184 compared to 195 in 2022 and 186 in 2021) deal activity remains higher than the pre-COVID levels of 162 in 2019 and 167 in 2020.
Commenting on this, Kobile stated that: “Across the continent, we have seen VC gain popularity as an investment strategy. Our economy depends on this sustained investment into our entrepreneurs and into innovative solutions that can help leapfrog South Africa into a more competitive and inclusive economy.”
Similar to the previous year, a noticeable feature was the growth in co-investment activity, demonstrative of corporations and foreign investors investing alongside early-stage fund managers.
ICT dominates capital flow
In line with the global trend for VC type investments, the ICT sector, which combines several active sub-sectors such as Fintech, EdTech, Software, eCommerce and Online Market, continued to outweigh the investment activity in other sectors. ICT as a primary sector almost doubled in number of investments compared to 2022, amounting to 87.6% (48.1% in 2022).
Fintech remained the front-runner by value (18.3%) and number (14.8%) of deals, followed by Software at 9.8% of the total number of deals (6.7% by deal value). eCommerce made a significant jump from 2022 levels – a testament to the continued uptick in online shopping that was seen and rapidly developed during and after the pandemic years.
In terms of the types of fund managers engaging in active deals, independent funds led the charge in 2023 at 66.2% of the total number of deals in the active portfolio of VC investments – up from 61.8% in 2022 and 57.8% in 2021.
