Start-ups funding in Nigerian and other African countries hit $4bn as of the third quarter of 2022, and may rise to $7bn by the end of 2022.
This is according to a report by ‘Africa: The Big Deal and African Private Equity and Venture Capital Association’.
The report which monitors deals over $100,000, disclosed that over 800 investors had invested in Africa already in 2022, a 33 per cent increase from 2021, with about 250 of them closing more than one investment. 60 had been involved in five deals and more.
Nigeria is the biggest beneficiary of this with a large number of these investors investing in Nigeria. The third quarter figures for the continent were not as strong as preceding quarters with start-ups raising only $850m through 150+ deals over $100,000 (excluding grants).
The firms said, “Now, as expected, following a more quiet July and August months, Q3 numbers are slightly disappointing, at least relatively speaking. In absolute numbers, start-ups in Africa have raised more than $850m through 150+ deals over $100,000 (excluding grants).
“Back in 2019 or 2020, it would have been a stellar performance, but given what the ecosystem had delivered in the past year, it feels below par. In fact, it ends a streak of four quarters of the ecosystem raising over $1bn quarterly (Q3, 2021 to Q2, 2022) and of six quarters of positive YoY quarterly growth (and not any growth, triple-digit growth).
“All in all, Q3 registered a fall of -53 per cent YoY in amount raised and -25 per cent YoY in number of deals ($100,000+, excluding grants).”
It added, “As things currently stand, the ecosystem is on track to match or exceed the total amount of funding raised in 2021 ($4.5bn), which in itself is quite an achievement given global trends.”
According to the firm, over 100 start-ups in Africa had raised their first $1m+ round so far in 2022. This is a strong indication of increased investor confidence in the continent with only 40 start-ups raising $1m+ in the corresponding period of 2019; 55 in 2020; and at 72 in 2021.
The firm said, “Where can we find them? As is often the case, most of the action is concentrated in the ‘Big Four’, where 84 per cent of them are headquartered. Egypt (29) and Nigeria (28) are neck and neck, followed by Kenya (17). South Africa (nine) is comparatively underperforming; back in 2019, it was topping the list. Another eight countries can claim at least one such deal.”
It added, “How much are they raising? For 84 per cent of them, the amount announced was somewhere between $1m and $5m. The median amount raised is just above $2m, which is almost getting back to pre-pandemic levels ($2.1m in 2019) after two lower years ($1.5m in 2020, $1.7m in 2021).”
According to 2022 H1 African Venture Capital Activity Report, the AVCA expected the amount of venture capital investment on the continent to hit $7bn by the end of 2022.
It said, “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 per cent YoY increase from the 650 deals that took place in 2021.”
It added that if all indices remained unchanged, the value of capital raised by African start-ups was projected to hit $7bn by the end of 2022, a 35 per year-on-year increase from the $5.2bn that was raised in 2021.