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How African startups raised investments in 2020

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The venture capital scene in Africa has consistently grown, with an influx of capital from local and international investors reaching unprecedented heights in recent years. To understand how much growth has occurred, African startups raised a meagre $400 million in 2015 compared to the $2 billion that came into the continent in 2019, according to Africa-focused fund Partech Africa.

However, that figure isn’t the only yardstick. With other outlets like media publications WeeTracker and Disrupt Africa disclosing different results for the African venture capital market, we compared and contrasted their results last year. The result of that investigation detailed differences in methodology, as well as similarities.

In comparison to Partech’s $2 billion figure for 2019, WeeTracker estimated that African startups raised $1.3 billion while Disrupt Africa, $496 million for the same year.

It was expected that these figures would increase in 2020. But with the pandemic bringing in utter confusion and panic, companies downsized as investors re-strategized, and due diligence slowed during the first few months of the year. Also, new predictions came into light in May with some pegging expected deals to close between $1.2 billion and $1.8 billion by the end of the year.

Investments did pick up, and from July, VC funding on the continent had a bullish run until December. Although 2020 didn’t witness the series of mammoth deals in 2019 and didn’t reach the $2 billion mark, it proved to be a good year for acquisitions. Sendwave’s $500 million purchase by WorldRemit; Network International buying DPO Group for $288 million; and Stripe’s larger than $200 million acquisition of Paystack were high-profile examples.

To better understand how VCs invested in Africa during 2020, we’ll look into data from Partech Africa, Briter Bridges and Disrupt Africa.

Behind the numbers

In 2019, Partech Africa reported that a total of $2 billion went into African startups. For 2020, the number dropped to $1.43 billion. Briter Bridges pegged total 2020 VC for African startups at $1.31 billion (for disclosed and undisclosed amounts), up from $1.27 billion in 2019.  Disrupt Africa noted an increase in its figures moving from $496 million in 2019 to $700 million in 2020. 

Just as last year, contrasting methodologies from the type of deals reviewed, to the definition of an African startup contributed to the numbers’ disparity. 

Cyril Collon, general partner at Partech says the firm’s numbers are based on equity deals greater than $200,000. Also, it defines African startups “as companies with their primary market, in terms of operations or revenues, in Africa not based on HQ or incorporation,” he said. “When these companies evolve to go global, we still count them as African companies.”

Briter Bridges has a similar methodology. According to Dario Giuliani, the firm’s director, the research organisation avoided using geography to define an African startup due to factors contributing to business identities like taxation, customers, IP, and management team.

For Disrupt Africa, the startups featured in its report are seven years or less in operation, still scaling, and a potential to achieve profitability. It excluded “companies that are spin-offs of corporates or any other large entity, or that have developed past the point of being a startup, by our definition of one.”

The continued dominance of fintech and the Big Four

Despite the drop in total funding, Partech says African startups closed more total deals in 2020 than previous years. According to the firm, 347 startups completed 359 deals compared in 2020 compared to 250 deals in 2019. This can be attributed to an increase in seed rounds (up 88% from 2019) and bridge rounds due to shortage of cash amidst a pandemic-induced lockdown.

A common theme in the three reports shows fintech, healthtech, and cleantech in the top five sectors. But, as expected, fintech retained the lion’s share of African VC funding.  

According to Partech, fintech represented 25% of total African funding raised last year, with agritech, logistics & mobility, off-grid tech, and healthtech sectors following behind.

Briter Bridges reported that fintech companies accounted for 31% of the total VC funding over the same time period. Cleantech came second; healthtech, third; agritech and data analytics, in fourth and fifth.

Fintech startups raised 24.9% of the total African VC funding counted by Disrupt Africa. E-commerce, healthtech, logistics, and energy startups followed respectively.

2020 also showed the Big Four countries’ preponderance in terms of investment destination, at least in two out of the three reports.

The countries remained unchanged on Partech’s top five as Nigeria remained the VC’s top destination with $307 million. At a close second was Kenya accounting for $304 million of the total investments in the continent. Egypt came third with its startups raising $269 million, while $259 million flowed into South African startups. Rounding up the top five was Ghana with $111 million, displacing Rwanda which was fifth in Partech’s 2019 list.

The sequence remained unchanged from Disrupt Africa’s 2019 list as well. Funding raised by Kenyan startups reached $191.4 million; Nigeria followed with $150.4 million; South Africa, third at $142.5 million; Egypt came a close fourth with $141.4 million; while Ghanaian startups raised $19.9 million.

Briter Bridges took a different approach. Whereas Partech and Disrupt Africa highlighted funding activities per country of origin and operations, Briter Bridges chose to attribute funding to the startups’ place of incorporation or headquarters. This premise slightly altered the Big Four’s positions. Startups headquartered in the US received $471.8 million of the total funding, according to Briter Bridges. Those in South Africa claimed $119.7 million. Mauritius-headquartered companies received $110 million while African startups headquartered in the U.K. and Kenya raised $107.6 million and $77.1 million respectively.

On why Briter Bridges went with this narrative, Giuliani said the company wants its data to be an impartial conversation starter which can be used to investigate more complex dynamics such as the need for better policies, regulation, or financial availability.

This speaks particularly to the absence of Nigeria as a primary location for incorporation. Due to unfriendly regulations, business and tax conditions, Nigerian startups are increasingly incorporating their startups abroad and other African countries like Seychelles and Mauritius. It’s a trend that may well continue as most foreign VCs prefer African startups to be incorporated in countries with business-friendly investment laws.

Regional and gender diversity check

With an increase in startup activity in Francophone Africa, one would’ve expected an uptick in VC funding in the region. Well, that’s not exactly the case. Senegal, the region’s top destination for VC funding dropped from $16 million in 2019 to $8.8 million in 2020 according to Partech. The country was 9th on the list while Ivory Coast, placed 10th, raised a meagre sum of $6.5 million.

However, the good news is that 22 other countries received investments outside this Big Four this year, according to Partech data. Will we see this continue? And if yes, which countries will likely join the nine-figure club?

Tidjane Deme, a general partner of Partech Africa, believes Ghana might be next. He references how it previously used to be a Big 3 of Kenya, Nigeria, and South Africa before Egypt became a dominant force, and says a similar event might happen with the West African country.

“We see a clear diversification happening as investors are going into more markets. Ghana, for instance, is already attracting above $100 million. Of course, we all wish it would happen faster, but we also recognize that this is a learning process for both investors entering new markets and for founders learning about this game.”

Ghana also emerged in Giuliani’s forecast. He adds the likes of Tunisia, Morocco, Rwanda as second-tier countries quickly entering global investors’ radar and building more sophisticated ecosystems.

Tom Jackson, co-founder of Disrupt Africa, doesn’t mention any names. But he thinks that while there are some positives from other markets, the Big Four dominance will continue.

“Funding will filter down to other markets more and more, and there are already positive signs in that regard. But the space is still relatively early-stage and those four big markets have a big head start and will remain far ahead for years to come,” he said.

Another diversity check that cannot be overlooked is that of gender. Despite all the talk of inclusion, Briter Bridges reported that 15% of the funded startups in 2020 had women as founders, co-founders, or C-level executives. Partech, on the other hand, places this number at 14%. There’s still a lot of work to be done to increase this figure, and we might see more early-stage firms looking to plug that gap.

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Israel’s “green pass” is an early vision of how we leave lockdown

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The commercial opens with a tempting vision and soaring instrumentals. A door swings wide to reveal a sunlit patio and a relaxed, smiling couple awaiting a meal. “How much have we missed going out with friends?” a voiceover asks. “With the green pass, doors simply open in front of you … We’re returning to life.” It’s an ad to promote Israel’s version of a vaccine passport, but it’s also catnip for anyone who’s been through a year in varying degrees of lockdown. Can we go back to normal life once we’ve been vaccinated? And if we can, what kind of proof should we need?

Although there are still many unknowns about vaccines, and many practical issues surrounding implementation, those considering vaccine passport programs include airlines, music venues, Japan, the UK, and the European Union

Some proponents, including those on one side of a fierce debate in Thailand, have focused on ending quarantines for international travelers to stimulate the hard-hit tourism industry. Others imagine following Israel’s lead, creating a two-tiered system that allows vaccinated people to enjoy the benefits of a post-pandemic life while others wait for their shots. What is happening there gives us a glimpse of the promise—and of the difficulties such schemes face.

How it works

Israel’s vaccine passport was released on February 21, to help the country emerge from a month-long lockdown. Vaccinated people can download an app that displays their “green pass” when they are asked to show it. The app can also display proof that someone has recovered from covid-19. (Many proposed passport systems offer multiple ways to show you are not a danger, such as proof of a recent negative test. The Israeli government says that option will come to the app soon, which will be especially useful for children too young to receive an approved vaccine.) Officials hope the benefits of the green pass will encourage vaccination among Israelis who have been hesitant, many of whom are young. 

“People who get vaccinated need to know that something has changed for them, that they can ease up,” says Nadav Eyal, a prominent television journalist. “People want to know that they can have some normalcy back.”

Despite the flashy ads, however, it’s still too early to tell how well Israel’s program will work in practice—or what that will mean for vaccine passports in general. Some ethicists argue that such programs may further entrench existing inequalities, and this is already happening with Israel’s pass, since few Palestinians in the occupied territories of Gaza and the West Bank have access to vaccines

The green pass is also a potential privacy nightmare, says Orr Dunkelman, a computer science professor at Haifa University and a board member of Privacy Israel. He says the pass reveals information that those checking credentials don’t need to know, such as the date a user recovered from covid or got a vaccine. The app also uses an outdated encryption library that is more vulnerable to security breaches, Orr says. Crucially, because the app is not open source, no third-party experts can vet whether these concerns are founded.

“This is a catastrophe in the making,” says Ran Bar Zik, a software columnist for the newspaper Haaretz. 

Zik recommends another option currently available under the green pass program: downloading a paper vaccination certificate instead of using the app. Although that’s possible, the app is expected to become the most widespread verification method.

Unnecessarily complicated

In the US, developers are trying to address such privacy concerns ahead of any major rollout. Ramesh Raskar runs the PathCheck Foundation at MIT, which has partnered with the design consultancy Ideo on a low-tech solution. Their prototype uses a paper card, similar to the one people currently receive when they’re vaccinated. 

The paper card could offer multiple forms of verification, scannable in the form of QR codes, allowing you to show a concert gatekeeper only your vaccination status while displaying another, more information-heavy option to health-care providers. 

“Getting on a bus, or getting into a concert, you need to have a solution that is very easy to use and that provides a level of privacy protection,” he says. But other situations may require more information: an airline wants to know that you are who you say you are, for example, and hospitals need accurate medical records. 

It’s not just about making sure you don’t have to hand over personal information to get into a bar, though: privacy is also important for those who are undocumented or who mistrust the government, Raskar says. It’s important for companies not to create another “hackable repository” when they view your information, he adds. 

He suggests that right now commercial interests are getting in the way of creating something so simple—it wouldn’t make much money for software companies, which at least want to show off something that could be repurposed later in a more profitable form. Compared with Israel, he says, “we’re making things unnecessarily complicated in the US.” 

The way forward

It’s unclear what the US—which, unlike Israel, doesn’t have a universal identity record or a cohesive medical records system—would need to do to implement a vaccine passport quickly. 

But whichever options eventually do make it into widespread use, there are also aspects of this idea that don’t get laid out in the ads. For example, proposals have been floated that would require teachers and medical staff to provide proof of vaccination or a negative test to gain admittance to their workplaces. 

That could be overly intrusive on individual privacy rights, says Amir Fuchs, a researcher at the Israel Democracy Institute. Still, he says, “most people understand that there is a logic in that people who are vaccinated will have less limitations.”

Despite the progress in delivering vaccines, all these passport efforts are all still in the early stages. PathCheck’s idea hasn’t rolled out yet, although pilots are under discussion. In Denmark, vaccine passports are still more a promise than a plan. And even in Israel, the vision put forward by government advertising is still just an ambition: while pools and concert venues may be open to green pass holders, dining rooms and restaurants aren’t open yet—for anybody.

This story is part of the Pandemic Technology Project, supported by the Rockefeller Foundation.

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Hyzon Motors’ hydrogen fuel ambitions include two US factories

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Hyzon Motors plans to produce fuel cells, including a critical component required to power hydrogen vehicles, at two U.S. factories in a move aimed at kickstarting domestic production at a commercial scale.

The hydrogen-powered truck and bus manufacturer has already leased a 28,000-square-foot facility in the Chicago suburb of Bolingbrook and plans to expand it by an additional 80,000 square feet. Production at the Chicago facility is expected to begin in the fourth quarter of 2021. The announcement comes just three weeks after Hyzon announced it would become a publicly traded company through a merger with Decarbonization Plus Acquisition Corporation in a deal valued at $2.1 billion, and a little over one week after revealing plans to renovate a 78,000-square-foot factory in Monroe County, New York.

Hyzon is a new name with a nearly two decades of experience. The company was established in March of last year after spinning off from Singapore’s Horizon Fuel Cell Technologies, which has been developing commercial applications for fuel cells since 2003. Hyzon inked a deal in February with the New Zealand company Hiringa Energy for up to 1,500 fuel cell trucks on New Zealand’s roads by 2026. Now it is setting its sights on the North American hydrogen fuel cell vehicle market. Due to the lack of an established domestic hydrogen fueling network, the company is targeting heavy-duty vehicle customers that have a “back-to-base” business model.

Hyzon’s decision to build factories in the United States is noteworthy because production of fuel cell materials in the country lags far behind Europe and Asia. The U.S. also lacks the kind of national hydrogen refueling and infrastructure network found abroad.

“Hydrogen is much more available in places like Germany or The Netherlands,” Hyzon CEO Craig Knight said in an interview with TechCrunch. “There’s already a number of commercial vehicle stations where you can just pull up and pay to fill up like you do with gasoline today in the U.S. It won’t be long before that is a reality, but for the moment we limit the dependence on networks of hydrogen stations by focusing on the customers that use back-to-base operating models, where you only need one piece of hydrogen infrastructure to fuel dozens or even sometimes hundreds of vehicles in a given area.”

Much of the hydrogen that’s produced in the U.S. is so-called “grey hydrogen,” or hydrogen that’s produced from natural gas. An increasing number of companies are pursuing “green hydrogen,” or hydrogen produced via electrolysis powered by renewable energy. Hyzon sources both types for its operations. Hydrogen production remains one of the main factors determining the rate of scale for fuel cell producers.

The Chicago facility will design, develop and produce the membrane electrode assembly, the fuel cell component that helps trigger the electrochemical reaction required to produce power. The company anticipates the new facility will be able to produce enough MEAs for up to 12,000 fuel cell-powered trucks annually.

Finished MEAs will be sent to the company’s recently announced fuel cell stack and system assembly plant in Monroe County, where the components will be assembled into complete fuel cells. From there, the fuel cells will be delivered to a partner truck manufacturer to be assembled into commercial heavy-duty vehicles. The company’s main assembly partner in the United States is Berkshire Hathaway subsidiary Fontaine Modification.

Hydrogen fuel cell technology is finding use cases in heavy-duty vehicles because trucking companies are frequently paid by how much weight they can transport, and how quickly they can do it. The time investment of battery charging and the loss of carrying capacity makes fuel cells an attractive alternative for companies looking to decarbonize their vehicle fleets.

Hyzon sees positive network effects and economies of scale associated with hydrogen fuel cell adoption — and increasing marginal costs of electric battery adoption. Although the company has not announced plans to dive into the light-duty vehicle market, it remains bullish on the value proposition of hydrogen fuel cells.

“We think at some point it becomes an increasing marginal cost of adoption for battery electric, because you run into infrastructure limitations around the electricity grid, around the size of depots and the capacity to build the charging infrastructure,” Knight said. “We believe there’s a dis-economy of scale attached to going battery electric when you’ve got really high utilization. We believe that some of the lighter vehicles will also start to move onto hydrogen. We’re not totally dependent on that for our model, but that’s our belief.”

Hyzon, which expects to be listed on the Nasdaq in late May or early June, will be listed under the ticker HYZN.

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Donald Trump is one of 15,000 Gab users whose account just got hacked

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Promotional image for social media site Gab says

Enlarge (credit: Gab.com)

The founder of the far-right social media platform Gab said that the private account of former President Donald Trump was among the data stolen and publicly released by hackers who recently breached the site.

In a statement on Sunday, founder Andrew Torba used a transphobic slur to refer to Emma Best, the co-founder of Distributed Denial of Secrets. The statement confirmed claims the WikiLeaks-style group made on Monday that it obtained 70GB of passwords, private posts, and more from Gab and was making them available to select researchers and journalists. The data, Best said, was provided by an unidentified hacker who breached Gab by exploiting a SQL-injection vulnerability in its code.

“My account and Trump’s account were compromised, of course as Trump is about to go on stage and speak,” Torba wrote on Sunday as Trump was about to speak at the CPAC conference in Florida. “The entire company is all hands investigating what happened and working to trace and patch the problem.”

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