Based on the research conducted by Temi Ransome-Kuti, the location of a startup in Africa can have an impact on its valuation. The study focused on early-stage startups that secured venture capital funding between 2019 and 2022, comparing startups in the "Big Four" countries (Nigeria, Egypt, Kenya, and South Africa) with startups in other African countries.

At the pre-seed stage, startups in the Big Four countries had a wider range of valuations, typically between $1 million and $13 million, with some outliers valued between $15 million and $25 million. The middle 50% of valuations fell between $2 million and $7 million. On the other hand, startups in other African countries had a narrower valuation range of $1.5 million to $6 million, with the middle 50% of valuations between $2 million and $5 million.

The trend continued at the seed stage, with startups in the Big Four countries having a wider range of valuations between $835,000 and $40 million. The middle 50% of valuations for these startups fell between $7 million and $21 million. Startups in other African countries had valuations ranging from $5 million to $25 million, with the middle 50% of valuations between $8 million and $19 million.

These valuation differences can be attributed to factors such as market size, strength of the entrepreneurial ecosystem, and the familiarity of venture capitalists with the specific country. However, the research suggests that there is a positive development as more local funds and startup successes emerge from underrepresented markets. This growth and exposure could potentially encourage venture capitalists to consider and seek investments beyond the Big Four countries.

The newsletter invites readers to explore more insights from the research, including analysis by country, year, and sector.

Read more on Africa The Big Deal newsletter