Startups in Africa have no doubt recorded an exponential growth this year as they have continued to attract an increase in funding.
The funding for African startups is reported to have doubled in the first half of 2022, despite the global slowdown. The continent has defied all odds during this unfriendly economic period to record an increase in its funding.
Venture capital deals on the continent reached $3.5 billion in the first six months through June, more than double the amount recorded in the same period last year 2021.
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The funds were raised by 300 companies, with 27% of the companies led by female founders, or having at least one female founder. This compares to 25% in the previous year.
The increase in investment of startups in Africa is largely driven by startups raising larger amounts to expand on the continent through organic means as well as acquisitions.
Kenyan-based e-commerce firm Wasoko, a startup transforming communities across Africa by revolutionizing access to essential goods and services, raised $125 million to expand Cote d’Ivoire and Senegal, and also Kenyan solar fintech M-Kopa raised $75 million to expand its operations in Ghana and Nigeria.
African startups raised $3.1 billion in the first half (H1) of 2022, more than what they had raised in H1’2021 and H1’2020 combined, which amounted to $1.7 billion, setting a record in startup investment.
Funding raised in H1 2022 saw a double increase to what was realized in H1 of 2021, 2020, 2019, and 2018 which were $1.2 billion, $531 million, $454 million, and $169 million respectively.
It doesn’t come as a surprise that Fintech startups in the region have continued to attract the majority of investment inflows, accounting for 89% of deals in the financial sector.
While West Africa accounted for the largest share of deals by volume, East Africa recorded the strongest growth in its share of deal volume when compared to the previous year.
Analysts and experts have disclosed that If the current trend continues, fundraising will hit $7 billion this year, 35% more than the $5.2 billion raised in 2021.
A total of $4.7 billion startup deals were done on the continent in the period driven by a significant amount of fresh capital raised by fund managers in 2021, increasing interest in Africa’s venture ecosystem and overall larger ticket sizes.
The continent has also been described as the only market to see more than single-digit growth in the period, according to the report. Private capital investors achieved 22 full exits between January and June 2022, a 29% increase.
This compares to a 37% decline in exits globally as fund managers chose “to hold fast to their portfolio rather than risking divestment at unfavorable prices given falling valuations in public and private markets,” according to the report.
Still, there are indications that deals will slow on the continent next year as private capital fund-raising declined 20% in the first half of 2022 to $700 million, the report shows.