Jumia Funding to Jumpstart Africa’s Startup Ecosystem

Jumia, top e-commerce startup in Africa, makes a splash with latest funding round

Last week, it was announced that Africa Internet group raised $326M in funding from Goldman Sachs, MTN (African telecom), and other investors. The funding round is ear-marked to go straight into the group’s Jumia property. For those who aren’t familiar, Jumia is the #1 online retailer in Africa founded in 2012. The startup, inspired by Amazon.com here in the US, was founded to serve the growing appetite to purchase consumer goods online. 

The e-commerce opportunity in Africa is huge and rapidly growing with the high rates of mobile penetration across the continent. With this being said, there is still the challenge e-commerce startups face in emerging economics of people being brought in to a formal economy. Parts of the infrastructure that are well-established in developed economies which make e-commerce seamless have the opportunity to be vastly improved upon in places like Africa where there is less existing infrastructure.

Here are a few areas that I see as having huge potential:

Banking - Mobile banking has been one of the largest areas of disruption across Africa. The earliest “big winner” in the space was Mpesa, founded by Safaricom, back in 2007. There is still plenty to be done as mobile users move into the traditional banking system. The funding announcement for AIG mentions that financial services will be a big area of focus. 

Delivery - The “last mile” vertical of delivery services has seen a boom across Africa. These services are about taking packages and getting them from warehouses or centers to residencies that typically have no address. There has been a rise of these startups as they look to integrate deeply with both messaging services as well as the growing e-commerce companies. 

Outlook

The large funding round signals that AIG is looking to invest in the growth of Jumia. For founders, incubators, and investors this means there is growing interest in Africa as a maturing e-commerce market. This also means that there is cash in the market to make acquisitions and there could be some consolidation with this funding. Companies in the banking and delivery spaces could start to see exits to large, Africa-born e-commerce companies become a possibility. In other areas around the world, mature startup ecosystems begin to rely less on outside funding when large wins are created. This large funding round and any subsequent acquisitions could be big for creating an independent and robust African startup ecosystem.