African startups recorded the highest funding as of November last year, despite the economic downturn that affected funding not just on the continent but globally, data from the Big Deal has shown.
The data revealed that $4.6 billion was raised by African startups in the 11-month period, surpassing the $4.46 billion recorded in the whole of 2021, and this is expected to reach $7 billion by the end of 2022.
However, there were months in which funding activities went below expectations. Funding activities dropped in July, August, and November, hitting $247 million, $228 million, and $16 million respectively compared to $309 million, $683 million, and $605 million recorded in the same months in 2021.
According to the report, there’s no denying that inflation, food insecurity, bear markets, supply chain issues, and more affected growth, and capacity to raise capital for startups in Africa.
“Africa’s Big Four have attracted 75 percent of the funding raised by start-ups on the continent in 2022 so far (down from 82 percent in 2021). Yet the global slump has affected them in very different ways,” Max Cuvellier, GSMA’s head of mobile for development, said.
CB Insights, a market intelligence platform, revealed that global startup funding was down 55 percent year-on-year (YoY) in the third quarter of 2022, a fall ranging from 38 percent YoY in Europe to 83 percent YoY in Latin America. Africa experienced a 53 percent YoY decrease in the amount raised during the same period, it said.
Five things to note:
Funding
Startups in Africa raised over $1.8 billion in Q1 2022, up from $630 million in the same period a year earlier. The ‘Big Four’ still attract the vast majority of the funding ($1.5 billion, 83 percent), with Nigeria leading the way ($600 million), Kenya ($482 million), South Africa ($228 million), and Egypt ($202 million).
In the second quarter, funds raised by African startups amounted to $1.3 billion, which adds up to $3.1 billion in the first half of 2022, compared to $506 million raised in Q2 2021, totalling $1.14 billion raised in H1 of 2021.
However, Q3 2022 painted a different picture as the funding raised by startups amounted to $850 million compared to $1.8 billion in Q3 2o21, which represented a 67 percent fall. And for the first time, Q3 2022 registered the first YoY quarterly negative growth since fundraising started.
Fintech startups
Despite the decline in venture investment in the fintech space in 2022, fintech remains the lead in 2022, with a 16 percent loss in share of funding between 2021 (58 percent) and November 2022 (42 percent).
As of October 2022, fintech start-ups raised $ 1.4 billion in equity funding in 2022, and $2.4 billion in 2021. This loss can be attributed both to the lower number of $100m+ fintech ‘mega deals’, and to the fact that fintech ‘pure players’ bagged very large amounts of funding in 2021.
Investors
BusinessDay reported recently that African investors outperformed their foreign counterparts in investments in tech startups from January to September 2022 with 58 percent of the investment raised in the period.
As of August 31, 2022, 800+ investors have already put money in at least one $100k+ start-up deal in Africa this year, a 33 percent increase compared to the same time last year. And they’re also much more active: 250 have done two investments or more, and 60 of them have participated in five deals or more.
More than half of $1m+ deals in Africa since 2019 have had at least one Africa-based investor as one of the main investors., and this percentage has grown quite a bit since 2019.
Africa-based investors are more active in deals with start-ups headquartered in one of the Big Four (involved as the main investor in 59 percent of $1m+ deals since 2019) compared to those headquartered elsewhere with 37 percent.
However, these investors are particularly active in Egypt (67 percent), South Africa (65 percent), Nigeria (59 percent), and Kenya (47 percent).
Read also: Cloud adoption offers start-ups faster growth, AWS chips in credit – O’connor
Funding raised by gender of the CEOs
So far, 97 percent of the total funding goes to start-ups led by a male CEO. And there is no sign of a positive trend here either, as the percentage of funding going to female-led organisations keeps oscillating between 3 percent and 6 percent since 2019.
$1m+ round
As of August 31, over 100 start-ups in Africa have raised their first $1m+ round this year, compared to 72 in 2021, 55 in 2020, and 40 in 2019.
However, 84 percent of these deals were headquartered around the ‘Big four’, with Egypt having 29, Nigeria 28, Kenya 17, and South Africa 9.
