According to The Big Deal, a weekly that tracks fundraising in Africa, startups in Africa have already raised more than $4 billion in 2022. This information comes from the newsletter. The numbers for the third quarter, on the other hand, were described as “slightly disappointing,” so this number shows some kind of drop.
In the year 2022, African start-ups have already raised more than $4 billion in funding. The Big Deal serves as the image’s source.
Taking a look at the figures from the sector reveals that 2022 has been a very intriguing year for new businesses to launch in Africa. There has been a significant influx of venture capital investment into the African tech ecosystem since the beginning of the year. Because of this, a lot of new businesses on the African continent have been able to raise amounts of money that were unheard of before in order to grow.
The reason for this may or may not be tied to a slowdown in “mega deals,” which are defined as transactions of $100 million or more. But if one examines the amazing numbers that have been recorded in the past, it is obvious that brighter days lie ahead.
According to the African Private Equity and Venture Capital Association (AVCA), an industry body, 604 African entrepreneurs collectively raised a record-breaking amount of $5.2 billion in 2021. This figure is a new high for the continent.
Read also: Fintech and Edtech investments dominate South African venture capital
The investments from Venture capital
To date, startup companies in Africa have successfully raised $4 billion in 2022, which is the required amount to reach the “magic figure” in venture capital investment.
This excellent run should not come as a surprise to anyone. The African Venture Capitalist Association (AVCA) says that “concerted effort by African governments” is the only reason for the rise in startup funding, which is bigger than the number of opportunities on the continent.
In recent years, African governments have worked to create “vibrant and supportive ecosystems” that help businesses and investments grow.
Vitalik Buterin, co-creator of Ethereum, has expressed support for recent efforts by the Zambian government to transform the country into Africa’s technological hub. These efforts were just recently launched. Zanzibar initiated a “Silicon Zanzibar” program in August to lure technology businesses from all across Africa to the island. A month earlier, the Nigerian legislature had unanimously passed a bill about startups. This was done to help businesses that are based on technological innovation grow in the country.
In addition, the report stated that if all indices continue to remain unchanged and a similar compound annual growth rate carries forward into 2022 H2, the value of capital generated by African startups is expected to reach US$7.0 billion by the end of 2022. This would represent a 35% YoY increase from the US$5.2 billion that was raised in 2021.
To this point, in 2022, venture capital investing in Africa has experienced remarkable expansion. In the second quarter of 2022, companies in almost every other region had difficulty matching the amount of venture capital funding they raised the previous year. However, their African counterparts were an exception to this widespread pattern.
According to the data provided by Crunchbase, the total amount of worldwide venture capital slipped below $40 billion for the first time in more than a year in the month of May 2022, when it reached a low of $39 billion.
However, according to the findings of the AVCA study, the cumulative value of venture capital agreements that were reported in Africa reached US$3.5 billion in the first half of 2022. This is a 133% YoY growth from the 2021 H1 period.
Inching closer and closer to the magic figure
In its 2022 H1 African Venture Capital Activity Report, which came out a month ago, the African Venture Capital Association (AVCA) said that the total amount of venture capital investments in Africa would reach $7 billion by the end of the year. This would be a new high.
According to the findings of the study, there were a total of 445 venture capital agreements that involved 300 different companies that took place in Africa’s venture ecosystem during the first half of 2022. This represents a YoY rise of 72% compared to the first half of 2021.
According to the report, “assuming that everything else stays the same and that 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.” This represents a 38% YoY increase from the 650 deals that were completed in 2021.
About Venture Capital
Venture capital is a type of private equity financing that can be offered by venture capital firms or funds to early-stage, emerging, and startup businesses that are considered to have high growth potential or that have already exhibited high growth (in terms of number of employees, annual revenue, the scale of operations, etc.). These early-stage enterprises receive financial backing from venture capital firms or funds in exchange for equity, sometimes known as an ownership share. Investors in venture capital are willing to put their money into potentially unsuccessful businesses, expecting that some of the companies they back will eventually be profitable.