
Nigeria maintained its top spot in 2022 despite a modest decline in venture capital investments in Africa of $6.5 billion.
According to the African Private Equity and Venture Capital Association (AVCA) report, the investments, distributed among 853 agreements, mark a 1% fall from 2021, a record year in Africa. When compared to venture capital globally, the figure has shrunk by 32%.
The reports stated, “When evaluated against any year other than the stratospheric 2021, industry activity in Africa’s venture capital ecosystem was very strong”, In a report that was included with the data, AVCA wrote.
But the Reuters article highlighted that the venture capital investments established a record in the first half of 2022 and would go on to account for two-thirds of deals by value for the year, offsetting a weak second half.
While just a small portion of the $445 billion invested globally went to African start-ups, the continent has experienced continuous growth, mostly due to investments in businesses in the financial sector. According to the data, the industry was responsible for 42% of deal value and 31% of deal volume in 2022.
Although 15 significant investments in firms drew a total of $2.2 billion, the median deal size across all investment phases was $2 million. In a series D fundraising round, Sun King, a supplier of off-grid solar energy solutions in Africa and Asia, raised $260 million.
Flutterwave, a financial company with a focus on Africa, raised $250 million. Additionally, the off-grid solar startup d.light, based in Kenya, secured $238 million in venture debt.
The research said that West Africa continued to be the most active region for venture capital investments, driven by Nigerian start-ups.”All things considered, 2022 was clearly a difficult year for venture capital investment globally, with the overall amount invested reaching a year-end peak of $445 billion.
Compared to 2020, venture capitalists invested $100 billion more last year. 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 are 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.