Venture capital witnessed a correction of sorts in 2022 as VC activity dropped from the highs experienced in 2021. Every part of the globe was affected by the hesitation of VCs to write cheques, although Africa was not notably affected. In actuality, funding to Africa grew 8% year-on-year. Nevertheless, funding to Latin America fell 79% from the highs of 2021 and 39% in Asia, while European startups received 25% less money.
Startups in Kenya raised $608 million from 15 debt funding rounds in 2022. The East African country is followed by Egypt, where startups raised $350 million, while Nigeria and South Africa round up the top four with $252 million and $77 million, respectively.
Many startups willing to raise funds saw their valuations reduced as VCs became developed cold feet to accept high valuations. With equity funding becoming more challenging to come by, more African startups turned to debt funding, the result being $1.55 billion, a higher figure than Nigerian startups ($1.2 billion) raised in 2022.
At least nine sectors were represented, but two sectors – fintech (45%) and cleantech (39%) – were responsible for 84% of debt funding across the continent. In like manner, nine companies were responsible for 66% of debt funding. The most active sources of debt funding for the year with at least three deals were Lendable (7+), Symbiotics (7+), Cauris (3+), Contact Financial (3+), FMO (3+), Oikocredit (3+), and Verdant Capital (3+)
Funding was not all that increased in 2022, as the number of unique investors on the continent grew 29% year-on-year. At least 335 of these investors played a part in two or more deals, while eight investors did more than 15 deals. The report notes that of the 10 investors that participated in at least 15 deals in 2021, only two– Y Combinator and Launch Africa – maintained their level of activity.
The most active seed-stage investors were involved in more than 10 deals, while the most active venture stage (Series A and B) completed over 6 deals. There was a good representation of local investors across early-stage and later-stage deals with Future Africa, Ingressive Capital, LoftyInc Capital Management, and Voltron Capital, some of the most prolific local investors, which was worthy of admiration.
A broken financial system and a considerable number of Africans being cut off from the financial system ensure that financial technology will continue to be the darling of the investor community. Despite a strong showing from other sectors (51% year-on-year growth) and a -41% drop in fintech funding, the industry remained the most funded sector taking in $1.9 billion from investors. The second most funded sector – cleantech – raised $863 million. Commerce (electronic, mobile, and social) also saw growth at 124% YoY.
Startups with at least one female co-founder grew 12% YoY, with Kenya and Nigeria seeing the greatest number of deals and the most amounts raised. Startups founded by women in Kenya raised $146 million, while startups founded by women in Nigeria raised $127 million. The seed stage saw the highest funding allocation ($212 million), with growth stage funding recording only $69 million.
