African Start-ups Defy Global Economic Slowdown, Double Funding in H1 2022

Emmanuel Addeh in Abuja

Start-ups in Africa have recorded an exponential growth this year despite a slowdown globally and continuing to attract an increase in funding, Bloomberg has reported.

The funding for African start-ups doubled in the first half of 2022, with the continent defying all odds during the unfriendly economic period to record an increase in its funding, the report said.

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.

The funds were raised by 300 companies, with 27 per cent of the companies led by female founders, or having at least one female founder. This compares to 25 per cent in the previous year, according to the African Venture Capital Association.

While Nigeria and other West African countries 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.

The increase in investment of start-ups in Africa is largely driven by the firms raising larger amounts to expand on the continent through organic means as well as acquisitions.

Kenyan-based e-commerce firm Wasoko, a start-up 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.

They raised $3.1 billion in the first half 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 start-up investment.

Funding raised in H1 2022 saw a double increase to what was realised in H1 of 2021, 2020, 2019, and 2018 which were $1.2 billion, $531 million, $454 million, and $169 million respectively.

It wasn’t a surprise that Fintech start-ups in the region had continued to attract the majority of investment inflows, accounting for 89 per cent of deals in the financial sector.

Analysts and experts have disclosed that if the current trend continues, fundraising will hit $7 billion this year, 35 per cent more than the $5.2 billion raised in 2021.

A total of $4.7 billion start-up 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.