Startup funding showed signs of a slowdown in August

In July, venture capital investment in African tech startups dropped year-on-year for the first time in 2022. In August, they declined even further, with startups from 10 countries closing 58 funding rounds (disclosed and above $100K) that totaled over $228 million.

That’s according to data from Africa: The Big Deal, a newsletter that tracks venture capital investments on the continent.

On a year-on-year basis, that’s a 67% decrease compared to the $683 million African startups raised in August last year and a 9.4% decline by deal count (compared to 64 in August 2021).

In addition, August’s funding is the lowest amount raised so far in a month by African startups this year, being 7% less than the $246 million the ecosystem raised in the previous month. By deal count, however, there was a 7% decrease, from 54 deals in July.

$3.6 billion raised so far in 2022

August figures mean the total startup funding in the continent in 2022 has now reached more than $3.6 billion through over 600 deals. That’s 57% more than the amount raised within the same period last year ($2.3 billion), through over 480 deals. 

As of August 31, more than 770 investors had signed checks for startups in Africa in 2022.

Nigerian fintech behemoth TeamApt’s $50 million Pre-Series C round was the largest disclosed funding deal in August, followed by ArabyAds’ $30 million Pre-Series B and Homzmart, also with a Pre-Series B investment worth $23 million. 

Combined, the top three rounds accounted for 45% of the total funding African startups received in August. They’re followed by the $20 million raised by SWVL through a private placement and Omnibiz’s $15 million Pre-Series A round.

Major takeaway

Venture capital investments are slowing down in Africa, and strongly. It’s forcing stakeholders to revise bullish expectations formed earlier this year on the back of a record 2021 for the funding landscape. 

But it’s “not all doom and gloom though” Max Culliver writes in the Big Deal. “Deal activity is holding up better than the amount raised, which highlights that what July and August really missed was the very big deals. And at the end of the day, 2022 so far (January-August) still compares really well to the same period in 2021: with +25% YoY in terms of number of $100k+ deals (608 vs. 486), and +55% in terms of amount raised ($3.6bn vs. $2.3bn), there is still room for optimism!”

Africa is on track to surpass last year’s $5 billion VC funding mark but this depends on if the continent can manage to shake off what seems to be a decline in big-ticket funding. 

Away from funding jitters, two themes stand out among the largest fundraising in August.

Firstly, the frequency of rounds with the prefix “Pre-”. Pre-Series A, B, or C rounds usually means the company hasn’t reached its target or hasn’t closed the round. They announce the one they’ve raised while working towards the rest.

Secondly, along with fintech, e-commerce/retail was the darling of venture capitalists active in Africa. In the case of Omnibiz—a startup that makes it easy for retailers to restock their inventory in record time and at no extra costs—entrepreneurs see B2B commerce as the road to Africa’s informal markets, and VCs are placing bets on those hopes.

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