Venture Capital (VC) Trends Watch in Africa

Venture capital investment is one of the common and, perhaps, critical funding options for start-ups. This type of financing is known for taking large bets out on new businesses which have left the start-up phase.

These investments not only provide the needed funds for businesses to grow and scale their ideas but also bring other things to the table. First is the willingness to invest a fairly large sum of money in a start-up believed to have a high growth potential; thereby assuming more risk than other traditional investors such as angels, family and friends, etc. Venture capitalists also offer their networks, expertise, experience and resources to guide the start-ups they invest in. This formidable combination is a valuable one that start-ups can harness to tackle the often tough terrain that is the business world.

2022: A Look at Africa’s Venture Capital Investment

Nicole Dunn, in a LinkedIn post titled, Is the Venture Capital Model Working for Africa? last year, wrote: Venture capital investment in Africa increased 15x in the last six years reaching ~$5 billion in 2021. This momentum has continued into 2022, with a new record month in funding every month this year – surpassing $2 billion in the first four months of the year. One of her sources was Africa: The Big Deal, the weekly, online newsletter based on a curated database of deals from across the African continent.

Related: 6 Sources of Funding for Start-ups

Other African start-up watchers echoed similar thoughts around the same time, with some even predicting that 2022 would end on as high a note as $7 billion in venture capital investments. Because by July 2022, African start-ups had raked in a record $3.5 billion. The continent’s start-ups were raising unparalleled amounts at record speed, making it the only region in the world experiencing a rise in venture capital flows. If the trend continued in that manner, there was no telling what December 2022 would bring.

It did not.

2022 closed with African start-ups raising funding which exceeded $5 billion (about $5.4, including undisclosed deals) but failing to meet the $7 billion projected. Though, the amount realised was a slight percentage increase from the figures of 2021 despite a global pullback in VC funding.

2023: What do Venture Capital Trends Hold for Africa?

We at GetFundedAfrica would like to know as well. The first month of the year is gone, and the second is jogging along already.  

Alluve leads its predictions for 2023 with one word: uncertainty. It stated that expectations were high last year but were quickly squashed by war, inflation, and geopolitical upheaval. Among other things, it quoted the CB Insights reports about global venture capital in Q3 2022 as being the lowest funding recorded – $74.5 billion – since the $60.2 billion reported in Q2 2020. 

Back home in Africa, TechCrunch predicts Africa will continue to experience the “sustained funding slowdown in 2023” which began last year. This happened when the global “venture capital market correction caught up with the continent.” TechCrunch projects that “investors will continue to pull back, making it harder for new and existing startups to raise capital.”

Related: The Venture Capitalist

Techpoint envisages a “tougher year” for the African start-up ecosystem. It believes things would get worse before they get better; one of which is a shortage of IT talent. Though it intersperses bad news with the good and foresees “more investments in Africa from the Diaspora” with “more investors focused on capital efficiency.”

Fortunately, predictions are . . . things likely to occur. And as Techpoint stated, they might not even happen.

But whatever unfolds in the African VC investment space this year, VC Trend Watch will be capturing and publishing the information every week.

Join us!

Related: How to Find the Right Venture Capitalist to Fund your Business

About GetFundedAfrica

GetFundedAfrica is building Africa’s largest tech-enabled marketplace, connecting African founders with global mentors, coaches, corporates, investors, and government. Whether you want to raise funds ranging from $100, 000 to $50m or you simply want to grow your business, sign up for free at:

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button