Venture capital (VC) is a form of financing focused on young companies with high growth potential, companies that have become ever more important for, even synonymous with, job creation and technological innovation. Venture capital funding is prevalent in both developed and developing countries, increasingly becoming an important determinant of economic development.
In 2022, while global venture capital funding decreased by 35% from its volume in 2021, the African tech venture funding ecosystem was a notable outlier. Partech’s recent report shows that the continent has become the fastest-growing venture capital ecosystem in the world. Despite a dip in 2020 during the COVID-19 pandemic, the ecosystem has not stopped growing, with a Compound Annual Growth Rate (CAGR) of 46% in funding volume since 2018.
The total (debt and equity) funds raised for African tech startups was $6.5 billion through 764 rounds in 2022, an 8% increase in funds and a 6% increase in deals from the previous year. The geographical reach of VC funding in 2022 was 28 countries, compared to 29 countries in 2021.
Key takeaways in equity deals and funding
- A total of 693 equity rounds were raised by 653 start-ups in 2022 vs 681 rounds by 640 start-ups the previous year.
- The total amount of equity funding raised by African start-ups in 2022 was $4.9 billion, down by 6% compared to $5.2 billion in 2021.
- Despite seeing a 36% year-to-year (YoY) decline in the total invested amount, Nigeria remained the biggest funding destination in the continent, attracting more than $1.2 billion in 2022. South Africa, Egypt, and Kenya each attracted over 700 million dollars.
- Ethiopian tech start-ups raised $4 million in equity funding from three deals in 2022.
- While Fintech retained its status as the most funded sector, the total investment that the sector attracted decreased by 41% YoY to $1.9 billion in 2022.
- Start-ups founded by women raised 22% from all rounds in 2022, up 2% from 2021 to 644 million dollars accounting for just 13% of total equity funding to the continent. Its share, however, has declined by 3% from 2021.
- While there was a significant arrest in the growth rate of the global number of equity investors, Africa’s tech ecosystem attracted more than 1,000 unique investors for the first time (1,149) in 2022.
Trends in debt deals and funding
- Debt funding kept growing during COVID-19 in 2020 and the downturn of 2022, with a CAGR of 42% in activity since 2018.
- Debt has become a solid alternative source of capital for African tech start-ups in 2022, representing 24% of the total $6.5 billion raised.
- The volume of debt raised in 2022 more than doubled from the previous year, with a total of $1.5 billion in debt raised through 71 separate deals.
- The number of active debt investors in the continent is growing at an average of 2.5 times YoY, with a mix of local debt institutions, international lenders with emerging market vehicles, and Development Finance Institutions.
- Kenya, Nigeria, Egypt, and South Africa attracted 83% of total debt funding and 69% of all debt deals in 2022.
- Debt funding was dominated by the fintech sector, accounting for 45% of both debt funds and total deals. The cleantech sector registered the second-highest figures, attracting 39% of debt funds and 23% of total deals in 2022.
NB: The report only takes into account equity or debt rounds that amount to at least $200,000.
View the full report here.