AUGUST 04, 2022

4 min Read

Downturn reaches Africa? VC investment simmers down in July

For the first time in 2022, African tech startups monthly funding numbers have dropped, compared to the same period last year.

In July, tech startups from 15 different African countries secured a total of $246 million in venture capital investments across 54 fully disclosed deals, per data from Africa: The Big Deal, a newsletter that tracks venture capital investments on the continent.

Chart: daba/Data: The Big Deal
Chart: daba/Data: The Big Deal

That’s the lowest amount raised so far in a month by African startups and 20% less than the $309 million the ecosystem raised in 27% fewer deals compared to 74 rounds in July 2021.

On a month-on-month basis, Africa saw a 44% decrease in the value of VC funding last month, compared to the $439 million received in June. By deal count, there was a 17% decrease, from 66 deals in the previous last month.

Chart: daba/Data: The Big Deal
Chart: daba/Data: The Big Deal

$3.4 billion raised so far in 2022, in 7 months

Year-to-date, African startups raised $3.4 billion across 539 deals within the first seven months of 2022, an impressive 110% increase when compared to the $1.6 billion raised between January and July 2021. Also, more than 714 investors have signed checks for startups in Africa in 2022.

Senegalese unicorn Wave Mobile Money’s $91.5 million debt round was the largest disclosed funding deal in July, followed by d.light’s $50 million debt round and Scorefam with $25 million venture round. 

Combined, the top three rounds accounted for 88% of total funding African startups received in the month. They’re followed by the $20 million debt financing raised by Moove and Egypt-based Cartona’s $12 million round.

Chart: daba/Data: The Big Deal

By sector, fintech led the way in July, both by the value of funding raised and volume of deals. Completing the top 3 are energytech and the telecoms, media and entertainment sectors.

Fintech startups raised $111 million (45% of all the funding received) while energy startups raised $66 million (27%) and media/telecoms startups $26 million (11%).

Chart: daba/Data: The Big Deal
Chart: daba/Data: The Big Deal

Major takeaway

Perhaps the global downturn in venture capital investments has reached Africa? It certainly appears so but may be too early to conclude. 

Before July, Africa was the only region to maintain 3-digit year-on-year growth in venture capital investments. H1 2022 was the ecosystem’s strongest first six months of the year ever. But amid the bear markets, it’s become harder for founders to raise capital as valuation figures nosedive.

A spate of lay-offs and halted expansion are being announced by startups in Africa; prominent ones include Wave’s decision to let go 300 employees and scale back operations in new markets, and Kenya-based Sendy’s 10% employee downsizing and rumored plans to halt its expansion to Egypt and South Africa.

It’s a tough time in the startup world and venture backers, amid broader global macroeconomic headwinds. 

But for new investors, now might be the best time to enter the venture capital world: there is an ongoing reset and with it comes an opportunity to back great companies of the future at lower prices while facing less competition from deep-pocketed rival investors, the majority of which are scaling back investment activity amid the downturn.

Want to invest in Africa’s most promising companies and stay up to date on venture investing on the continent? Join our waitlist to receive daily updates, a weekly newsletter, and recaps on weekends!

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This material has been presented for informational and educational purposes only. The views expressed in the articles above are generalized and may not be appropriate for all investors. The information contained in this article should not be construed as, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy or hold, an interest in any security or investment product. There is no guarantee that past performance will recur or result in a positive outcome. Carefully consider your financial situation, including investment objective, time horizon, risk tolerance, and fees prior to making any investment decisions. No level of diversification or asset allocation can ensure profits or guarantee against losses. Articles do not reflect the views of DABA ADVISORS LLC and do not provide investment advice to Daba’s clients. Daba is not engaged in rendering tax, legal or accounting advice. Please consult a qualified professional for this type of service.

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