African leisure startups had their greatest ever yr in 2020 — Quartz Africa

African entertainment startups had their best funding year last year, despite struggling to find business models that work on the continent.

The startups raised a total of $ 13.9 million in 2020, nearly 19 times the sector’s income in the previous year and nearly 116 times the sector’s income in 2018 the report by Disturb Africa, a website for the latest news on African tech startups.

“Purchasing power is growing, entertainment startups are increasingly thriving where others have failed, and investors are looking for opportunities that go beyond busy areas like fintech, healthcare and e-commerce,” Tom Jackson, co-founder of Disrupt Africa, told Quartz . “There would always be a drip-down effect and we’re starting to see it.”

The tremendous growth reflects the success of a handful of companies rather than the entire sector. This year, according to the report, all funds went to just 10 companies.

Africa’s entertainment space ”is still in its infancy and is characterized by a large number of early supporters who occasionally collect money. Otherwise the landscape is relatively sparse, ”says the report.

The best funded African entertainment startups

The main beneficiary of funding in the African entertainment sector last year was Kenya Mdundo, a music streaming and download platform. It raised $ 6.4 million from its oversubscribed IPO on the Nasdaq First North Growth Market in Denmark.

Other startups that have secured funding are from South Africa Carry1st, who develops and publishes mobile games and content apps, and Sea monsters, a game and animation creator. They received $ 2.5 million and $ 1 million, respectively. StarNews Mobile, an Ivorian video-on-demand startup, received $ 1.8 million. The investments came mainly from venture capital funds.

Fintech is still king

Despite its record performance, the entertainment sector lagged most of the rest, with fintech far ahead. The entertainment sector secured 2% of funds last year, compared to 0.15% in 2019.

Look for a profitable model

As internet connectivity and the number of connected devices increase, Africans are becoming larger consumers of content. However, it remains difficult to find a sustainable model for entertainment companies on the continent to operate with, partly due to the high cost of data and piracy. A relatively small middle class and non-essential spending on entertainment has also prevented startups from entering the market, Jackson said.

As an an example, iROKOtv, one of the first mainstream movie streaming websites in Africa and an early success story among entertainment startups on the continent, has shifted its focus from Africa to African diaspora markets in North America and Western Europe in search of profit.

But Mdundo seems to have found a way to make money. It generates revenue by selling song advertising space that users can download for free. The company generated $ 300,000 in ad sales this way in 2019. Mdundo and StarNews Mobile, Jackson, said, “Realize that mobile-first, data-lite and low-cost solutions are the way forward, on a large scale and in multiple markets.”

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