Venture capital investment in Africa will hit $7bn by the end of 2022- Report

A look at the industry numbers shows that 2022 has been quite an interesting year for startups in Africa. Since the beginning of the year, a huge flow of venture capital investment has found its way into the African tech ecosystem, with many startups on the continent raising unprecedented amounts to expand their services.

According to The Big Deal, a newsletter that tracks fundraising in Africa, over $4 billion have already been raised by startups in Africa in 2022. This figure, however, represents some sort of decline due to Q3 numbers which were said to be “slightly disappointing”.

Unlike the first and second quarters of the year, Q3 “registered a fall of -53% YoY in the amount raised and -25% YoY in a number of deals ($100k+, excluding grants),” the newsletter said.

The reason for this may not be unconnected to a slow down in ‘mega deals’ of $100m and above. But of course, better days are ahead if one considers the impressive numbers recorded in the past.

For instance, in 2021, 604 African startups raised a record high figure of $5.2 billion, according to the African Private Equity and Venture Capital Association (AVCA), an industry group. 

Read also: Constant Ventures is offering up to $15m venture fund for West African startups.

Edging towards a ‘magic figure’

In its 2022 H1 African Venture Capital Activity Report released last month, AVCA projects that the amount of venture capital investment in Africa will hit an all-time high of $7 billion by the end of the year.

According to the report, the first half of 2022 saw 445 VC deals involving 300 unique companies take place in Africa’s venture ecosystem, which corresponds to YoY growth of 72% from 2021 H1.

“Assuming all else remains unchanged and a similar compound annual growth rate carries forward into 2022 H2, we can expect the total volume of VC deals to reach approximately 900 deals by the close of 20225 – a 38% YoY increase from the 650 deals that took place in 2021,” the report said.

Related news: Home cleaning startup, SweepSouth raises $11m pre-seed funding.

An impressive run

So far, VC funding in Africa has witnessed impressive growth in 2022. While startups in nearly other regions of the world struggled to replicate the venture capital funding they raised last year in the second quarter of 2022, their African counterparts were an exception to this global trend.

According to data by Crunchbase, global venture funding fell to $39 billion in May 2022, marking the first month in more than a year when it dropped below $40 billion.

However, according to the AVCA report, the cumulative value of VC deals reported in Africa reached US$3.5 billion in 2022 H1, representing a 133% YoY increase from 2021 H1.

This impressive run is hardly surprising. For AVCA, the growth in startup funding, beyond the depth of the potential the continent has to offer, is all thanks to the “concerted effort by
African governments” who in recent years have nurtured “vibrant and supportive ecosystems, enabling entrepreneurship and investment to thrive”.

Just recently, the Zambian government kick-started a bid to transform the country into Africa’s tech hub, a move backed by Ethereum co-creator Vitalik Buterin. In August, Zanzibar launched its “Silicon Zanzibar”, aimed at attracting tech companies from across Africa to the island. A month earlier, the Nigerian legislature passed a startup bill to create a friendly environment for tech-based startups in the country.

The report added that if all indices remain unchanged and a similar compound annual growth rate carries forward into 2022 H2, the value of capital generated by African startups is expected to reach US$7.0 billion by the close of 2022, representing a 35% YoY increase from the US$5.2 billion raised in 2021.