How African startups raised venture capital in 2022
Reading Time: 5 minutesEarlier this month, we reported that investors’ sentiments surrounding venture capital activity going into this were more reserved than upbeat. Investors believe the market correction, which caught up with the continent in the second half of 2022, will spiral into this year. But before that, there was shared optimism that African startups would raise more VC funding last year than in 2021 when the continent, for the first time, passed the $4-5 billion threshold.
There was reason to believe so. For one thing, by the first half of 2022, Africa seemed to defy the global venture funding decline after its startups raised $3 billion, double the amount secured over a similar period the previous year; therefore, a twofold increase by December seemed plausible. It didn’t turn out as expected, as equity deals on the continent by the end of the year hovered around $4.8-$5.4 billion, per insights from data trackers Briter Bridges, Partech and The Big Deal, with slight percentage differences from their 2021 numbers.
‘Despite the challenges that emerged in the second half of the year, 2022 was another year of growth for Africa in terms of total funding raised, number of deals and number of investors involved. This is particularly noteworthy, as every other region experienced a double-digit drop in funding activity during the same period,’ said Max Cuvellier, co-founder of The Big Deal on Africa’s investment activity in 2022.
Most tech observers share Cuvelier’s thoughts on VC activity in Africa. However, it’s noteworthy to point out that deals reported in Africa lag their global counterparts by several weeks or months, so the continent most likely went flat year-on-year. As we’ve done in previous years, let’s peep into 2022 numbers from the three data trackers and compare them with 2021.
Total funding and number of deals
Briter Bridges: According to the market intelligence firm, African startups raised $5.4 billion in total estimated funding, including undisclosed rounds, across more than 975 deals in 2022. Briter Bridges recorded $5.2 billion in total funding across over 790 deals the previous year.
Partech: The venture capital outfit pegged funding for African tech at $6.5 billion (combination of equity and debt deals) across 764 rounds. Equity deals accounted for $4.9 billion across 693 deals. However, unlike Briter Bridges’ and The Big Deal’s findings, Partech’s data reveals that total equity funding on the continent fell 6% from $5.2 billion in 681 rounds.
The Big Deal: The report puts the total funding that African startups raised at $4.8 billion across 1,000 deals. It’s a considerable increase from $4.33 billion across 820 rounds in 2021.
Sectors: Fintech is still clear
Briter Bridges: Despite fintechs taking a big hit by the global VC downturn, the sector remains the most backed among others in Africa. In 2021, fintechs represented 62% of the total VC funding raised by startups on the continent; the number fell to 38% last year, according to Briter Bridges. Rounding up the top five: cleantech (15%), logistics (12%), mobility (8%) and e-commerce (5%).
Partech: Fintech remains the most funded sector in Africa across all sources of capital, with 39% of the total equity volume (down from 63% in 2021) and 45% of the total debt volume. Other sectors have experienced substantial growth and gained a meaningful share of the equity funding activity this year: Cleantech (18%), e/m/s commerce (13%), enterprise (11%) and mobility (4%) complete the top-five list.
The Big Deal: Fintech accounted for 37% of the total funding raised in African tech compared to 53% in 2021, according to the data tracker. Energy comes in at a far second with 18%; logistics follows behind with 13%, while retail, telecom, media and entertainment comprise the next best-funded sectors.
Top countries: Big Four are still hotspots for African VC investment
Briter Bridges: Companies in the ‘Big Four’ (Nigeria, Kenya, Egypt and South Africa) captured 75% of all investment value and the number of deals. According to Briter Bridges, the top countries by the value of investments include Nigeria (25.4%), Kenya (24.2%), Egypt (18.4%), and South Africa (10.9%). Ecosystems outside the top four include countries like Ghana, Uganda, Tanzania, Morocco and Tunisia.
Partech: Nigeria represented 23% of African tech’s total equity funding. South Africa takes the second spot with 17%, Egypt at third at 16%, and Kenya at 15%. Outside the top four countries, startups from Ghana, Algeria, Tunisia and Senegal raised the most equity funding.
The Big Deal: Nigeria topped the African VC investment destination with $1.2 billion. Kenya is a close second with $1.1 billion, followed by Egypt with $820 million and South Africa with $555 million.
Little has changed for female-led startups
Briter Bridges: According to the tracker, all-female-founded teams were responsible for 4.9% of the total funding raised by African startups last year. When these companies have at least one male co-founder, the number increases to 9.7%.
Partech says female-founded startups, including the ones with at least one male co-founder, accounted for 13% of the total equity funding, down 3% from 2021. However, they raised 22% of all deals in 2022, up 2% from 2021. The investment firm didn’t provide data on only all-female-founded startups.
The Big Deal: Female-founded startups, or gender-diverse teams, received 13% of Africa’s total equity investments. It was 18% last year. However, on a more comforting front, the share of all-female-founded teams increased from 1% to 2.4%, which is still abysmal.
Other learnings from Africa’s venture capital performance in 2022
Dario Giuliani, founder and director of Briter Bridges, said when looking at a 10-year time frame, Africa’s tech ecosystem has constantly grown at a decent pace, and in this sense, focusing on the variation of the past few years is detrimental because of the several outside phenomena such as COVID, post-COVID cash abundance and the global market crunch.
He also argues that while all metrics grew, from the number of deals to exits and new international investors to new local early-stage investors, the weight of mega deals over total funding and the fact that they mostly come from American, non-Africa-focused investors has created some dependency on overseas capital. ‘Though at the same time, it can open up opportunities for local funds to earn ground and enter better deals,’ he added.
For Tidjane Deme, general partner at Partech Africa, more emphasis must be placed on how startups are starting to embrace debt financing. With 71 debt deals (65% year-over-year) accounting for $1.55 billion (106% year-over-year) in total funding, Partech noted in its report that 2022 confirms the growing impact of debt as a driving asset class for the African tech ecosystem.
Startups in cleantech and fintech have built deep and advanced operations, attracting a new generation of debt capital providers with creative structures. Some examples include MFS Africa and Solarise Africa. But while the number of active debt investors on the continent has grown 2.5x from last year — with a good mix of local debt institutions, international lenders with emerging market vehicles and Development Finance Institutions (DFIs) — Deme believes the market needs more debt fund managers in addition to the likes of Symbiotics and Lendable that will provide adequate capital for startups who are beginning to value its importance.
‘We [Partech] don’t do debt, but we sit at boards of companies we’ve encouraged to raise debt because it’s the obvious next step into getting non-dilutive capital that can fuel growth. At some point, it was too early to create venture debt funds because the pool of startups that required it was not deep enough because you need a large pool of startups to absorb that debt before you can see local dedicated vehicles,’ said Deme. ‘But I would expect that starting from now, we’ll see more and more of those pop up, or you will see existing equity players create debt vehicles and decide to complement what they offer.’
Reference: https://techcrunch.com/2023/01/27/how-african-startups-raised-venture-capital-in-2022/
Ref: techcrunch
MediaDownloader.net -> Free Online Video Downloader, Download Any Video From YouTube, VK, Vimeo, Twitter, Twitch, Tumblr, Tiktok, Telegram, TED, Streamable, Soundcloud, Snapchat, Share, Rumble, Reddit, PuhuTV, Pinterest, Periscope, Ok.ru, MxTakatak, Mixcloud, Mashable, LinkedIn, Likee, Kwai, Izlesene, Instagram, Imgur, IMDB, Ifunny, Gaana, Flickr, Febspot, Facebook, ESPN, Douyin, Dailymotion, Buzzfeed, BluTV, Blogger, Bitchute, Bilibili, Bandcamp, Akıllı, 9GAG