Finance

Africa: Venture capital financing drops below the US$1 bln mark in Q3-2022,

Wednesday, 05 October 2022 15:38
Africa: Venture capital financing drops below the US$1 bln mark in Q3-2022,

(Ecofin Agency) - The volume of financing raised by startups active in Africa slowed at the end of Q3-2022. For the first time in four quarters, the US$1 billion mark was not reached.  

Startups active in Africa raised US$850 million via US$100,000+ deals in the three months ending on September 30, 2022, the platform Africa: the Big Deal reveals. This is the first time in four quarters that the US$1 billion mark was not crossed, its analysis show.  

The year 2022 started well with record-breaking and rising volumes during February (US$638 million, +258% YoY) and March (US$738 million, +117% YoY). But, around July, things started going quiet. Truly, July is usually a slow fundraising period but African startups experienced a huge 20% year-over-year drop in the volume of venture capital financing raised. In August, that drop was 67%.  

Data collected by Ecofin Agency show that only US$391 million in venture capital financing was raised by African startups through US$100,000+ deals in September 2022. This is 53% lower than the $823 million recorded during the same month a year earlier. 

It is still early to point out the reasons for such poor performance. However, analyses by specialized firms such as Endeavor indicate that those venture capitals are usually raised by startups in growth niches, particularly those that are involved in the digitalization of payment services. The investor base is also constituted mainly of usual players like Launch Africa or Y Combinator.

In a blog published in June 2022, the African Venture Capital and Private Equity Association (AVCA) urged investors not to be swayed by downward trends in the global start-up investment market. It reminded investors that, unlike the stock market, African start-ups still offer the opportunity to invest in concrete projects that combine impact and returns.



 
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