The African tech ecosystem stands out with $6.5 billion, representing eight per cent growth from 2021 and spread across 764 deals, compared to 724 rounds in 2021, a new report has revealed.
Overall, Nigeria, South Africa, Egypt and Kenya remain the top investment destinations in Africa, with a share of total volume staying relatively steady at 72 per cent. Nigeria retained the top rank, bringing in $1.2 billion in capital, despite a decline of 36 per cent from 2021.
South Africa, Egypt, and Kenya each attracted over $0.7 billion in funding, with Ghana completing the top five with just over $0.2 billion. Overall, 28 countries attracted equity funding in 2022, 13 of them in Francophone Africa.
According to the annual report on Africa Tech Venture Capital(VC), released by Partech Africa, the VC fund dedicated to technology startups in Africa, consist of disclosed and confidential deals.
Findings of the report showed that Africa Tech Ecosystem saw debt funding more than double in volume, reaching $1.55 billion through 71 deals (65 per cent YoY growth).
In comparison, equity rounds showed a slight decline, as 653 African tech startups raised $4.9 billion (-6 per cent) in 693 equity rounds (2 per cent YoY growth), the report has showed.
Focusing on equity funding, the report revealed the ecosystem was still accelerating during Q1 and Q2 of 2022 compared to 2021, with the YoY comparison showing Q1 and Q2 at +127 per cent YoY and +83 per cent YoY, respectively.
“However, the global VC slowdown stifled growth in activity in Q3 (-65 per cent YoY) and Q4 (-35 per cent YoY). In 2022, fundraising activities remained flat across all stages.
“At $1.4 million, Seed+ ticket sizes averaged higher in 2022 (+12 per cent YoY), while Series A remained the same at $8.5 million. Later stages reverted to 2019 levels, as Series B and Growth round sizes dropped by -23 per cent and -50 per cent YoY, respectively. In addition, 2022 witnessed a significant reduction in the number of megadeals [over 100 million], with only seven deals compared to 14 in 2021,” the report further revealed.
Speaking on the launch of the annual report, general partner at Partech, Tidjane Deme said: “2022 was a particularly challenging year for the venture ecosystem worldwide, as venture and growth investors scaled back their investment by a third.
“However, by comparison, our report revealed that the African tech ecosystem showed great resilience, as more investors have doubled their commitment to the continent by investing in local teams and funds dedicated to the market, proving to be the best way forward.”
In light of the market downturn, the report’s findings also revealed that Fintech, which has historically attracted sizable investments, was the most impacted by the slowdown in the number of large rounds. However, fintech remains the most funded sector in Africa, across all sources of capital, with 39 per cent of the total equity volume ($1.9 billion) and 45 per cent of the total debt volume ($691 million).
Other sectors have experienced substantial growth and gained a meaningful share of the equity funding activity this year, most notably, Cleantech, which made a big comeback with 18 per cent of total equity funding at $863 million (+347 per cent YoY) but also 39 per cent of the total debt funding at $605 million.
General partner at Partech, Cyril Collon, added that, “Much of our methodology has remained the same over the years, and we, therefore, can provide a snapshot of how the African continent has evolved over the years.
“Nigeria and the fintech vertical have remained at the top spot; however, in an environment where equity funding is more challenging, debt has proved to be a solid alternative source of African tech startups in 2022, which signals a maturity within each sector.”
