Venture funding in Africa fell by 54% in Q3 2022 – report

Venture funding in Africa surprisingly dropped by 54% in Q3 2022, the CB Insights State of Venture Q3’22 Report has indicated.

Meanwhile, this isn’t just an African problem. According to the 262-page report released on Wednesday, global funding fell to its lowest levels since Q2 2020.

A total of $74.5 billion was raised in Q3 2022, which represents a 34% drop QoQ, the largest quarterly percentage drop in a decade. The figure also means that global funding is down by 58% from its peak in Q4 2021.

What the numbers are saying

According to the report, startups in Africa raised a total of $367 million in Q3 2022, representing a significant decline when compared to the $804 million raised in Q2 2022. Also, the volume of deals fell from 135 recorded in Q2 2022 to 117 in Q3 2022.

In comparison, the drop in venture funding in Q3 2022 represents a 13% fall QoQ.

Period (2022)	Amount raised	Deals in numbers
Q1	$922m	173
Q2	$804m	135
Q3	$367m	117

This decline no doubt raises concerns, considering the fact that Africa was the only region to record three-digit growth in the first quarter of 2022. But in July, Africa’s tech ecosystem recorded the lowest funding this year, raising $239,706,000 – a 43.77% decrease from June’s $426,280,000. 

However, experts believe the seeming slowdown in venture funding globally is the result of venture capital firms changing their focus from growth-stage startups to early-stage startups. Recall in May, global venture funding fell to $39 billion, marking the first month in more than a year when it dropped below $40 billion.

Read also: African startups raised $239m in July 2022, a 43.77% decline from June.

Top equity deals

The third quarter of this year saw a number of African startups raise interesting amounts in different funding rounds. Listed in the CB Insights report are 13 top equity deals in Q3 2022, with Nigeria taking the highest number with four deals.

Leading the pack is Nigerian fintech startup TeamApt which raised $50M in what was termed a “pre-Series C round”. The amount represented 13.6% of the company’s total funding.

Another major deal involved Mauritian digital connectivity and infrastructure provider, West Indian Ocean Cable Company Holding Ltd (WIOCC Group) which secured a $30 million equity investment from International Finance Corporation (IFC) in September.

A month earlier, Nigerian sports gaming platform Scorefam raised $25 million from Bahamas-based investment firm GEM Digital Limited. Egypt-based furniture and home supplies marketplace Homzmart, also raised a $23 million pre-Series B round in August. Just recently, YC-backed food procurement platform Vendease raised $30 million in an equity and debt funding round.

Other top deals in Q3 2022 are:

1. South African biometrics start-up iiDENTIFii- $15 million
2. Nigerian fintech startup, NowNow- $13 million
3. Egyptian e-commerce platform Cartona– $12 million
4. South African home cleaning startup, SweepSouth- $11m pre-seed
5. Tanzanian SaaS platform Ramani- $10m
6. Insurtech startup, Turaco- $10m
7. Seychelles-based crypto exchange platform, KuCoin- $10 million
8. South African startup, DataProphet- $10 million

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

Better days ahead

At a time when global funding was reduced by 3% in the first half of the year, the cumulative value of venture funding deals reported in Africa reached US$3.5 billion, representing a 133% YoY increase from the same period last year.

The reasons for this exception may include the efforts of African governments geared at “enabling entrepreneurship and investment to thrive,” the African Private Equity and Venture Capital Association (AVCA), an industry group, said in a recent report.

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. Bloomberg predicts that if this funding trend continues, the continent may beat last year’s record of $5 billion.

It’s no surprise that the 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.