The last 12-18 months has been an exciting time for Africa’s venture capital markets as unprecedented amounts of capital have gone to the region’s increasingly promising start-ups and early stage businesses. In 2015, total VC funding stood at $277 million, according to Partech analysis; by 2017, this had almost doubled to $560 million, with the number of funding rounds in technology companies increasing from 55 to 128 over the same period.

This year looks set to be active, too, with the $47.5 million investment in digital payments business Cellulant by TPG’s Rise Fund, and two Kenya-based investments by venture firm TLcom’s Tide Africa Fund –$3.5 million in survey platform mSurvey and $5 million in mobile marketing company Terragon – boosting the funding totals. These $1 million-plus deals are a world away from the five-figure rounds that, until recently, characterised the African start-up scene.

It’s a development that Michelle Ashworth, a venture consultant to CDC Group has witnessed first-hand. “I started working with CDC two years ago,” she says. “At that point, we were just starting to see more and larger deals. Over the last two years, we’ve seen a rapid development as more capital has gone into Africa’s VC markets, funds have invested larger ticket sizes and businesses have matured a little more.” She points to companies such as payments business Flutterwave, which has recently raised $10 million and training specialist Andela, which attracted $40 million in a Series C round in 2017.

“There is an increasing appreciation among international VCs of the opportunities available in Africa,” adds Weyinmi Popo, partner at Orrick. “We’re seeing a lot more interest from Silicon Valley VCs in the region.”

These opportunities include sectors such as fintech and off-grid energy technology, as a lack of existing infrastructure and technological developments enable companies to scale rapidly. Some of these businesses are receiving support from global accelerators, which should, in turn, build further VC dealflow in the future. Recent African recipients of seed capital from start-up accelerator Y Combinator, for example, include cryptocurrency exchange BuyCoins, wealth management platform CowryWise and electronic medical records specialist Helium Health.

The prize for investors at seed stage and beyond is, according to Ashworth, the potential scale of some of these businesses. “One of the most exciting things about VC in Africa is that there is no reason why these companies can’t go global,” she says. “Where in later-stage buyouts, for example, investors often look to create national champions and pan-regional businesses, many VC investments could expand well beyond Africa in a relatively short space of time.”

Early stage businesses are also increasingly able to count on local VCs for capital, too. In the first half of 2018, African VC funds raised $94 million, a total that surpassed the full year for 2017. Many of these local funds remain reliant on development finance institutions for their capital, however, with organisations such as FMO playing an important role in the development of VC in African markets. “We’re now seeing more local VC funds entering African markets, where previously the international funds were more prevalent,” says Irina Manea, investment officer at FMO. “Many of the newer, local funds are being established by individuals with experience in developed markets and as an investor, we’d like to see more of these funds being raised.”

Its fellow DFI, CDC, recently set aside a $75 million pool of capital for African VC funds and among the opportunities it is currently assessing is a vehicle managed by a sub-Saharan Africa firm with people in both Africa and the US. “The individuals were trained in the US,” explains Ashworth, “but they have great networks on the ground and a full appreciation of local conditions.”

In the space of just a few years, it seems VC has found a place in African economies. “It’s definitely part of the funding mix now,” says Popo. “Previously, only expensive debt might have been available for these companies – VC is making a significant difference, especially as rounds of as little as $5 million can make a significant difference to a company’s ability to scale.”

So does that mean it has reached critical mass? Perhaps not yet. One issue is investment tends to be concentrated in certain areas. “There is already a strong VC ecosystem around three main hubs – Nairobi, Lagos and Cape Town. We are also supporting further development beyond these areas and into Francophone West Africa, Uganda and Tanzania,” says FMO’s Manea.

Another is the nascency of the VC market. “VC has developed quickly across Africa and it’s definitely moving in the right direction,” says Ashworth. “But there are still missing pieces to the jigsaw, although these will be filled over time. A few good exits from the current VC portfolio have the potential to be transformational – they will draw out LPs, which will be more willing to look at Africa, they will encourage more local and international GPs and they will inspire more entrepreneurs to establish new businesses.”