Go to Africa, Harvest the Next Web3 Era
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Go to Africa, Harvest the Next Web3 Era
Africa needs Web3.
Navigating Web3 tides with focused insightsRecently, I've been focusing on the primary market of USD-denominated funds. Overall, fundraising has become significantly more difficult compared to previous years. One clear trend is that China's fundraising capability is now falling behind Southeast Asia. Capital is increasingly drawn to narratives around "emerging markets." In the past, China was the largest emerging market; today, it’s no longer as “sexy.” Instead, Southeast Asia and India have taken center stage. Surprisingly, even low-average-revenue projects in India are achieving astonishing valuations—whether in traditional internet or Web3, the primary market there is exceptionally hot.
But when it comes to novelty, who can beat Africa?
This article is contributed by three Web3 practitioners from India—Joel John, Rohan Khurana, and Sumanth—and published in Chinese under authorization by TechFlow, revealing the investment opportunities in Africa’s Web3 market through their eyes.
Below is the main text:
Have you ever wondered why most internet tech companies are influenced by Silicon Valley?
I have a theory: during the early days of the internet, the U.S. telecommunications industry already had strong infrastructure in place. When Napster disrupted the music industry, the physical infrastructure needed to bring AOL into households was already established. Because the U.S. represented the largest internet market, most capital funding and initial innovation originated from this region.
Consider what happened in the late 2000s. As mobile devices became cheaper and connectivity no longer relied on physical lines, emerging markets around the world rapidly came online—meaning each market began facing competition from local variants. In mid-2010s Indian e-commerce, I witnessed the battle between Amazon and Flipkart (acquired by Walmart); Uber had to retreat from China in favor of DiDi; Careem competes with Uber here in Dubai where I now live.
The chart above supports this claim. Until the mid-2000s, much of the world lagged far behind North America. Despite relatively low internet penetration, China still attracted substantial venture capital due to its population being four times larger than that of the U.S., along with significant talent flow between China and Silicon Valley.
Why am I bringing all this up? Because a new form of network is rebuilding the internet. When Web1 and Web2 took off, many parts of the emerging world were left behind—they were still struggling to get connected. But that has changed.
Web3 marks the first evolution of the web where everyone starts from the same starting line. North America boasts strong financial markets, Europe produces incredible research innovations, while Southeast Asia and Africa show vast consumer bases when we examine application-layer examples like Axie Infinity.
My view is that in the next phase of Web3, regional markets will spawn independent players best suited to local cultures. Of course, some exceptions will benefit from network effects and scale, but products deeply aligned with local culture are more likely to be created by locals who understand nuanced differences. For example, Coinbase stepped back from India after pressure from local regulators.
If so, Africa could be blockchain’s next big market. Over the past few weeks, we’ve studied the region and startups emerging from several countries. Some founders shared their experiences with us. Here’s what we found.
Regional Differences
First, I must clarify that this article views Africa almost entirely from the perspective of startups and technology. Africa has 54 countries, but our observations are limited to just four.
Africa is a vast continent with extremely diverse cultures. I’m not the best person to comment on the continent’s complex geopolitics, nor am I a social scientist, so we won’t discuss non-financial or non-network metrics.
In terms of GDP, the region’s largest economies are Nigeria, South Africa, Kenya, and Ghana. Today, much of the region’s internet narrative centers on Nigeria. In terms of teams accepted into Y Combinator, the country currently ranks third globally, behind only the U.S. and India. Last year, African startups raised $5.2 billion—20 times more than the $275 million raised in 2015.
This growth is healthy, especially considering the region saw only about 3,300 funding rounds since 2015, compared to approximately 73,000 in the U.S. Singapore, thanks to its robust corporate laws and tax structures, attracts a level of venture activity (~3,300 rounds) comparable to the entire African continent.
Thus, venture capital remains at a low level in the region, though several countries have GDPs significantly higher than others in Africa. So what’s the opportunity here? I believe two factors are driving ecosystem development. First, internet penetration is growing rapidly across these regions—I see extremely steep growth curves, with increasing numbers of people coming online.
In 2006, about 70% of the U.S. population was online; today, that figure is around 82%. In China, it’s about 70%. By contrast, Kenya grew from just 11% internet users in 2011 to nearly 30% in 2020. Ghana appears to be growing even faster—over the past decade, close to 60% of its population has gone online.
Moreover, among the four major countries mentioned, an increasing proportion of the population stores money in financial institutions. In Kenya, 80% of people have bank accounts; in Ghana, it’s nearly 57%; the African average is about 40%. Previously, when discussing emerging markets, we focused on providing banking services to the unbanked.
Thanks to the rise of mobile networks, much of Africa already has the infrastructure needed to serve the unbanked. Now, the need is for more ways to help those with access to internet and financial services increase their income—that’s where Web3 comes in.
Previously, I wrote an article on aggregation theory and Web3, whose core idea is that blockchains reduce the cost of verification and trust. Historically, friction within local systems made it hard for emerging markets to achieve high premiums.
This includes corruption and fraud—but this leads me to my second reason for being bullish on Africa. I believe blockchain will lower verification and trust costs in the region, leading to higher incomes and faster processes.
The most authoritative data on Africa comes from Chainalysis’ cryptocurrency geography report. Between July 2020 and June 2021, crypto transaction volume in the region reached $106 billion—less than 3% of global crypto transactions. On average, about $20 million trades daily via P2P exchanges, amounting to roughly $7.5 billion annually—still very early stage.
A few years ago, Binance clearly saw an opportunity and established a presence in Uganda in 2018. Yele Bademosi joined as a director to identify and lead blockchain ventures in the region. Today, he runs Nestcoin, a VC arm dedicated to helping regional businesses focused on DeFi, metaverse, and digital art.
While researching these trends, we asked him: what drives digital asset adoption in Africa?
1. Income—Africans have embraced crypto because it creates alternative income streams. The informal economy—drivers, fishermen, open-market traders, small businesses—accounts for about 70% of sub-Saharan Africa’s economy. Youth unemployment ranges from 25% to 60%. The internet offers alternatives unavailable in current local markets.
2. Inflation Hedge—Since 2008, Nigeria’s Naira has depreciated from $0.008 to $0.02—a loss of 80% over 15 years.
Kenya has faced a similar fate, with its currency losing nearly 50% of its value over the past decade. Additionally, government restrictions prevent Nigerians from protecting wealth via dollar savings or foreign investments.
“The monthly limit for buying things abroad or investing with your Nigerian card is $20—it’s crazy. With this cap, you can’t even pay for GitHub or Zoom,” said Ugo from Xend Finance, a startup backed by Binance and Google Launchpad, which focuses on interest-bearing accounts via stablecoins.
3. Remittances—One might assume serving a large customer base in a compact region reduces costs. But if numbers tell the story, that’s not the case. As noted earlier, sub-Saharan Africa receives about $48 billion in remittances annually, with Nigeria accounting for half. Despite high volumes concentrated in a small area, average remittance fees remain between 7% and 10%.
For insights into better remittance solutions, look at Chipper Cash, valued at over $2 billion. It offers free cross-border payments and has 4 million users. Recently raised $250 million in a round led by FTX. Chipper hasn’t yet adopted a P2P remittance model, but may do so in the future.
Finally, we compiled a list of 48 startups in Africa’s crypto ecosystem, narrowing it down to 34 that have raised at least $100,000.
Of the roughly $5.3 billion invested in the region via venture capital, only about $170 million went to crypto-native companies—just 3%. Only one company (Valr) has reached a Series B valuation. Among the 30 companies we tracked, 20 are still pre-seed or seed stage, another five are at Series A. Most capital in the region flows into fintech ecosystems. Similarly, among Web3-native firms, most funding goes to payment processors, remittance platforms, and exchanges.
Among the region’s ten highest-valued blockchain-related companies, only two are exchanges: Yellowcard and Valr. We observe capital flowing instead into other gateways bringing people into the crypto ecosystem. For instance, Jambo raised nearly $40 million from Paradigm, Alameda, and Coinbase. They aim to become a super app for Africa—applications like Jambo are crucial for bridging cultural gaps between local users and Dapps built continents away.
Another way apps penetrate the market is by simplifying digital asset savings—not necessarily enabling speculation on Bitcoin or Ethereum prices, but helping users save baskets of crypto assets. Xend and Revix are currently focused on this model.
These apps reduce the effort required to vet quality assets. I recently invested $2.3 million via LedgerPrime in Coinmara’s venture round to support this same vision—I see them as the next billion-user crypto gateway for emerging markets.
Six of the top 10 most-funded African Web3 startups are based in South Africa, three in Nigeria, and one in Congo. This concentration of startups may lead to agglomeration economies. We see startups cluster in places like Silicon Valley, Bangalore, or Singapore because the presence of other startups lowers the cost of launching new ventures.
For example, among the 30 startups we tracked for this article, 18 are based in Nigeria—partly due to talent mobility. According to Google’s Africa Developer Report, only about 9% of the region’s 700,000+ developers are proficient in blockchain development, so talent tends to concentrate where other skilled individuals gather.
Investing in founders who previously worked at large tech companies is a common strategy today. Individuals who worked abroad and returned home tend to raise more capital. A recent Big Deal analysis showed founders with exposure only to the local ecosystem raised less than their overseas-educated peers.
How big is the gap? Only about 28% of funding goes to founders educated in Africa. Capital favors those who studied or worked overseas. However, this is beginning to change as African founders start investing in other African founders—an indicator of ecosystem maturation.
A Glimpse into the Future
So far, we’ve observed increasing internet adoption, rising use of digital banking, and growing capital inflows into Africa. But what does the future hold? I believe Africa’s big opportunity lies in leapfrogging its digital transformation. Recall how earlier in this piece I hinted at aggregation theory in the context of emerging markets?
As payments become less dependent on traditional bank branches and work grows more digital, African income levels will rise substantially—we’re already seeing a small number of artists in the region making a living through NFTs.
Another meaningful area poised for takeoff is gaming. Though still early, we’re likely to see the region’s P2E (play-to-earn) ecosystem grow. Mvm.gg is a game guild focused on the region. While gaming itself may not create sustainable livelihoods, it can help individuals afford training to develop other skills.
You might rightly argue, “Well, that’s great, but not everyone will play games or sell NFTs.” That’s true. My observation is that transitions from gamers and artists represent only an early transitional phase. As stakeholders in the region witness the possibilities enabled by blockchain, we’ll see applications in more traditional, rigid industries—the most direct case being agriculture.
Do you know why Kobe beef, Parmigiano Reggiano, or Spanish Iberico ham command such high prices? These goods can only be considered authentic if produced in specific regions. Restricting production to certain areas allows reduced supply and higher pricing while maintaining authenticity. It’s no secret, but historically, low-trust societies like India have struggled to secure premium pricing for their goods.
Part of the problem stems from fraud, tampering, and mismanagement in supply chains. Integrating blockchain (and sensors) into supply chains can restore trust in the system, thereby expanding consumer bases for these goods. This isn’t a far-fetched utopian vision. IBM offers an enterprise solution already tracking goods on blockchain. Last year, E-Stock Global partnered with Mastercard to store cattle data on-chain.
Startups like Chekkit have also helped consumers understand how their products are sourced, transported, and sold. Of course, fixing agriculture via blockchain requires massive coordination among cooperatives and national governments.
Another way to unlock opportunities is by empowering individuals to transition personally into Web3.
As far as I can tell, platforms like Questbook, Gitcoin, Mirror, and OpenSea are enabling individuals to create verifiable bodies of work linked directly to their identities. It’s not far-fetched to imagine skill portfolios being recognized via on-chain assets like NFTs in the future. If so, young talent in the region will quickly benefit from building online reputations.
This is already happening in India. SuperteamDAO helps individuals find meaningful work in vetted Solana projects by focusing on product-based grants and bounties. To date, they’ve distributed nearly $450,000 in grants. They play a crucial role in lowering barriers to Web3 participation and connecting talented individuals with rewarding opportunities.
Historically, trends like remote work benefited knowledge workers who already had access to elite educational institutions. These weren’t signals of skill, but signals of reputation.
Earlier, the only way to gain these “knowledge and reputation” credentials was gaining university admission through exams or affording tuition at a prestigious school. Web3 offers a new alternative. On-chain assets, such as NFTs awarded for completing courses, reduce the time and effort required to build credible skill reputations.
I’ve seen analysts hired almost solely based on their Dune dashboards, and platforms like Rabbithole.gg and Layer3.xyz enable anyone with a computer to earn these on-chain credentials.
Investment Opportunities
Every now and then, I see well-known U.S. investors say they’re bullish on India. It’s easy to say that when you’re not dealing with red tape and terrible traffic in Bangalore. But when you’re living amid hardships most foreign investors rarely see, staying optimistic is tough.
This article also has blind spots—I haven’t built in Africa, nor am I an expert consulted by founders there.
From what I understand, Africa’s ecosystem is severely underinvested. Out of roughly $50–60 billion in crypto venture investments (including ICOs), only about $170 million has gone to Africa. Given rising internet usage and the fact that the region has one of the youngest populations globally, this seems wrong.
Africa’s opportunity lies in investing in a generation capable of working, earning, and spending online. They’ll be able to use Web3 to reduce reliance on traditional intermediaries, transforming mundane, broken, fragmented processes into transparent, open, and verifiable ledgers—just like the agricultural use case I mentioned, creating real value. All of this requires financial infrastructure and technical knowledge. That’s why VCs are still feeling their way around in Africa.
Last year, Chainalysis reported that the user base of digital asset markets grew 12-fold within a single year. You could attribute this to base effects, but unlike India, China, or the U.S., Africa’s Web3 leaders have not yet emerged. No one knows which app or company will dominate. So Africa’s opportunity hinges on two things: one, the ecosystem catching up with the rest of the world; and two, using technology to disrupt traditional intermediaries in the region, paving the way for greater economic activity.
I don’t believe Web3 is a panacea for the region’s systemic issues—but it provides a path to alternatives that previously didn’t exist.
A famous 1970 paper titled “The Market for Lemons” explained how lack of trust between buyers and sellers can cause markets to collapse.
When economic interactions break down, the biggest constraint in emerging markets is the lack of insurance or recourse. Blockchain reduces the friction involved in establishing trust at a global scale. Properly implemented technology can reduce our dependence on unnecessary middlemen.
Change—in my view—will happen in two ways. First, bottom-up: people transitioning to Web3 to pursue higher incomes. You’ve probably guessed, the second way is through policy changes at the government level. Based on my own experience in India, I bet the former will come first.
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