African economies face an existential challenge: addressing critical issues such as water scarcity, food security, and energy transitions. These challenges require cutting-edge technologies, often referred to as deeptech, which combine breakthroughs in science and engineering to deliver transformative solutions. However, the growing trend of investors seeking foreign-origin deeptech solutions for problems in Africa raises questions about the continent’s capacity to incubate and scale its own innovation ecosystem.
Last April, Morocco-based UM6P Ventures renewed its call for deeptech startups, focusing on agriculture, health, and greentech — sectors vital for Africa’s sustainable development. Uniquely, the initiative targets innovations led by members of the Moroccan diaspora, reflecting an effort to tap into global expertise. The venture recently expanded its strategy by establishing a Paris-based branch in the former headquarters of phosphate giant OCP, and is now welcoming not just the Moroccan diaspora, but essentially all deeptech startups in France, and by extension Europe.
“Our goal is to connect our ecosystem to others at the international level to accelerate partnerships,” explains Max Lesaffre, head of UM6P France’s deeptech division. The new initiative focuses on watertech, recruiting startups with solutions for desalination, water purification, and agricultural optimization, solutions that startups in neighboring Tunisia, such as Wattnow and Kumulus claim to offer.
UM6P Ventures plans to support startups through a five-month non-equity program designed to create business and industrial opportunities. With investment tickets ranging from $100,000 to $500,000 for pre-seed and seed stages, the venture seeks to nurture breakthroughs while leveraging Morocco’s research and development infrastructure.
A Foreign Deeptech Revolution in Africa
Africa’s existing deeptech landscape has often been shaped by foreign players. Zipline, a San Francisco-based drone delivery company, epitomizes this trend. Despite raising $300 million at a $4.2 billion valuation last year, none of its high-profile investors — Sequoia, Andreessen Horowitz, or Google’s GV — are actively engaged in African deeptech ecosystems. Yet, Zipline’s groundbreaking work in drone logistics has primarily been deployed in African countries like Rwanda, Ghana, and Kenya, where healthcare delivery via drones has become a critical service.
“Most people think that advanced technology will start in the U.S. and then trickle down to other countries. That is not what we’re seeing,” notes Zipline’s CEO, Keller Rinaudo, recently.
The involvement of diaspora talent is another recurring theme. For instance, Zeno, a U.S.-based startup founded by Tesla alumnus Michael Spencer, is working to drive Africa’s electric vehicle ecosystem with its swappable lithium-iron-phosphate (LFP) battery technology. While Zeno raised $9.5 million in an oversubscribed seed round, the bulk of its investors, including Lowercarbon Capital and Toyota Ventures, have limited presence in Africa. The exception, 4DX Ventures, is one of the few African-focused backers in the deal.
Recent data further highlights the stark funding disparities in African deeptech. Between 2013 and the first half of 2023, African deeptech startups raised $3 billion across 360 deals, representing 15% of total startup funding on the continent. However, startups headquartered abroad disproportionately attract funding: 81% of foreign-incorporated African deeptechs succeeded in raising capital, compared to only 56% of African-headquartered counterparts. Furthermore, African-based deeptechs often rely on debt and grant funding, while their foreign peers secure larger equity investments.
While South Africa hosts the highest number of deeptech startups, Kenya leads in terms of funding and deals. Between 2013 and 2023, Kenya captured 25% of total deeptech deals and 32% of the funding volume, driven by foreign investment in foreign-based renewable energy startups. In contrast, South African deeptechs, mostly locally based, received just 5% of the funding, reflecting smaller ticket sizes and limited investor interest in early-stage companies.
Commendably, Africa-focused investors are stepping up to the challenge. Egypt-based Sawari Ventures and Egypt Ventures recently led a $9 million investment round in Si-Ware Systems, a Cairo-born but California-headquartered microelectronics company. In South Africa, Stellenbosch University’s University Technology Fund (UTF), which supports deeptech spinouts in industries ranging from shark safety to cancer detection, has also launched a second fund dedicated to scaling later-stage startups. This initiative aims to address the significant funding gap between early-stage and later-stage deeptech startups in the country. Such efforts are particularly notable in a sector that is historically underfunded and requires extended timelines for commercialization and profitability.
“Deeptech needs more VC funding and better legislation to facilitate operations and logistics,” remarked Hesham Haddara, CEO of Si-Ware Systems, a veteran microelectronics engineer and former professor at the Cairo-based Ain Shams University’s School of Engineering. Haddara recounted how the company managed to stay afloat by raising $20 million through a side business in microchip design, a testament to the resourcefulness required in this demanding field.
Despite these encouraging examples, African investors backing local deeptech startups have faced significant setbacks. Firms such as Cathay AfricInvest Innovation, which has invested in several African deeptech ventures like South Africa’s Aerobotics, have experienced painful multi-million dollar losses. Notable among these is the collapse of the Nigerian biotech firm 54gene and the liquidation of South Africa’s WhereIsMyTransport, which have left investors cautious. As a result, Cathay AfricInvest Innovation is now adopting a more conservative approach, significantly slowing further investments in African tech, particularly in the deeptech sector.
Yet reliance on foreign deeptech solutions to solve Africa’s pressing challenges raises broader questions about capacity building. Are local startups being sidelined in favor of foreign technologies, or are they failing to meet the rigorous demands of global investors? Initiatives like UM6P Ventures signal hope, but they underscore the need for more robust funding mechanisms, stronger infrastructure, and a collaborative approach to bridge the gaps between local innovation and global investment.
For Africa to take control of its destiny, fostering homegrown deeptech ecosystems will be as crucial as importing solutions. The continent’s challenges demand nothing less than transformative innovation — and that innovation must increasingly come from within.