Nigeria Tops as Africa Records over $6.5bn Venture Capital Investment, Sees Marginal Dip

Emmanuel Addeh in Abuja

Nigeria still remained top in 2022, as venture capital investments in Africa dipped slightly to $6.5 billion, but avoided the sharp drop seen in most other global regions, data released by an industry group has shown.
The investments, spread over 853 deals, representing a one per cent decline from 2021 – a record year in Africa – according to the African Private Equity and Venture Capital Association (AVCA), which promotes private investment on the continent. The figure compared to a 32 per cent contraction in global venture capital.

“When evaluated against any year other than the stratospheric 2021, industry activity in Africa’s venture capital ecosystem was very strong,” AVCA wrote in a report accompanying the data.
Venture capital investments hit a record in the first half of 2022 and would go on to make up two-thirds of deals by value for the year, offsetting an anaemic second half, a Reuters report said.

While African start-ups still attracted just a small fraction of the $445 billion invested globally, the continent has seen steady growth, propelled largely by investments in financial sector companies.
The sector accounted for 31 per cent of deal volume and 42 per cent of deal value in 2022, the data showed.

Overall, the median deal size across all investment stages was $2 million, though 15 large deals in companies attracted a combined $2.2 billion.
Sun King, a provider of off-grid solar energy products in Africa and Asia, raised $260 million in a series D funding round. Africa-focused fintech firm, Flutterwave raised $250 million. And d.light, a Kenya-based off-grid solar company, brought in $238 million in venture debt.

West Africa remained the most active region for venture capital investments, propelled by Nigerian start-ups, the report stated.
“Overall, 2022 was undoubtedly a challenging year for VC investment globally, with total global venture capital climaxing at $445 billion for the year. Venture capitalists put $100 billion more to work last year than they did in 2020, despite tighter investor purse strings and an increasingly unfavourable funding climate in 2022,” the AVCA report noted.

“While the global venture market experienced significant contractions in start-up funding to varying regional degrees, Africa’s venture ecosystem was relatively stable and only experienced a funding drop of less than $50 million compared to 2021,” the report added.
Comparatively, Latin America saw the biggest year-on-year decline in start-up funding to the tune of 59 per cent, followed by Asia which saw contractions of 35 per cent.

Consequently, the funding gap between Africa’s closest socio-economic comparator, Latin America, saw a near-fivefold decrease from $14.8 billion in 2021 to $3.1 billion in 2022.
“Although the volume and value of venture capital in Africa is relatively small compared to other regions such as North America and Asia, it has been growing steadily in recent years and shows potential for further growth in the future,” AVCA said.