Investment in Senegalese startups
The Senegalese startup ecosystem is increasingly becoming attractive for investors. Similar to its neighbors and established African startup hubs such as Kenya or Egypt, Senegal has high levels of political stability and law enforcement. These features are crucial for long-term investment allocation decisions. The current Foreign Direct Investment (FDI) net inflow shows exactly that. Despite only having around 8% of the Nigerian population, Senegal’s FDI net inflow is almost 40% of the Nigerian, indicating that Senegal is more attractive (relative to its size) than Nigeria. Per capita, compared to Egypt, Cameron, Ghana, Nigeria and Kenya, Senegal ranks only behind Ghana. Of course, startups are vital for this performance. Among the group of Senegal’s top 10 startups – Oolu, Paps, Mburu, Baobab+, PEG Africa, Talent2Africa, Wave Mobile Money, CAIF, ShopMeAway and Axxend — there are currently 26 listed investment rounds.
With the exception of Senegalese investors WIC Capital and Teranga Capital investing in Mburo and CAIF respectively, these rounds were almost exclusively led by foreign investors. The foreign investments stem mainly from the United States, France, and Mauritius. They represent both a direct and indirect international influence regarding innovation and entrepreneurship. French international company Orange is one of the main institutions supporting entrepreneurship in Senegal. The company’s Orange Digital Center, opened in October 2019 in Dakar, focuses on digital transformation, promotion of digital inclusion, innovation, entrepreneurship and to support the local digital ecosystem. Additionally, Orange has the role of an investor with Orange Ventures, which invests in tech companies in Africa and the Middle East. Despite no significant investments in Senegalese startups yet, the presence of Orange represents an opportunity for entrepreneurs.
Regarding government investments into entrepreneurship, the overall Senegalese situation is improving. In recent years, there has been a clear prioritization in stimulating the economy through innovation, education and as a result entrepreneurship.
Starting in the research and development sector, Senegal ranks above average compared to those countries mentioned above regarding the investment in percentage of Gross Domestic Product. Regarding education, Senegal has still a slightly lower tertiary education enrollment than other countries, however, it is progressing at the highest pace. Not to be overlooked is the creation of Bambey University with its high quality infrastructure. This example shows that Senegal is investing in entrepreneurship, both directly and indirectly. These are types of investments that will produce results in the mid- to long-term but show an increase of priority in developing a highly skilled workforce.
But there is even more happening in Senegal. Created in early 2018, The Délégation de l’Entrepreneuriat Rapide (DER) has the goal of boosting the startup ecosystem and mitigating the lack of incubators and accelerators. In November of the same year, they launched their first batch. $2 million USD were distributed to 40 businesses through various types of investments (equity, debt and convertible notes). Amounts ranging from 10k to 100k USD were invested into businesses across all economic sectors (health, e-commerce, FinTech, logistics, agri-food, etc). This first edition had such great results that DER affirmed to triple the budget for another round focused on the digital economy.
Additionally, there is a science hub park in construction to be completed in the beginning of 2023. It is located in Diamniadio (35 km from Dakar) and has spaces dedicated for both the public and private sectors including private companies, incubators, teaching and research centres and a Tier III data centre. It is an investment of 70 million euros, of which 61 million is financed by the African Development Bank and 9 million from the Government of Senegal.
Senegal still has a young ecosystem which explains why investments from local startup ecosystem players are still low. There are only a few high level investors and the network of active local investors is still small. While Dakar has some local investors such as the Dakar Network Angels and AFIG Funds, outside of Dakar an investment scene is almost non-existent. Dakar further benefits from hosting some regional events like the AfricArena West Africa Summit. These events also host francophone Africa-focused investors and are a great opportunity for Senegalese startups to participate in workshops, compete in pitches, and attract investment. Such events are very important because the benefits of an active startup scene can’t be substituted by grants alone. Being surrounded by peers who have already gathered experience and who have built a network in the field provides a lot of value to an entrepreneur that is difficult to measure, but nonetheless vital.
It is therefore important that the startup scene will also spread to other regions of the country besides Dakar as that would benefit Senegalese entrepreneurs tremendously.
Senegal presents good conditions to attract foreign investment: the government is progressively prioritising higher skill production, is investing more in innovative businesses and the internal ecosystem is developing. The direct and indirect forms of investment show positive signs for the Senegalese startup ecosystem to develop and in the future contribute to tackling some of the Senegalese challenges.
