VC investments in Africa increased by 28% year-on-year in Q3 2023, contrasting with the global trend that recorded a 15% decline during the same period.

Overall VC investments in Africa reached $895 million over the third quarter of 2023, up 28% compared with Q3 2022, a report published last November 9 by the African Private Equity and Venture Capital Association (AVCA) found.

The "Q3 2023 Private Capital Activity in Africa," report indicates that this amount brings the total funds injected by venture capital industry players into African startups during the first nine months of the current year to $2.95 billion. Africa stands as the only region in the world where VC investments recorded a double-digit increase in Q3 2023, AVCA noted.

During this period, the value of venture capital investments declined by 15% globally, reaching $73 billion. Latin America experienced a decline of -46%, while North America and Asia saw declines of -26% and -8%, respectively. A slight increase of 1% was recorded in Europe.

The report highlights that 118 VC transactions were recorded in Africa between July 1 and September 30 of the current year, representing a 28% decline compared to the same period last year. Similarly, transaction volumes involving African startups in the seed stage and early-stage recorded respective declines of -46% and -40% during the period. The volume of transactions in the late-stage (from Series B onwards) remained stable.

On the other hand, the average transaction size reached $11.9 million during the first nine months of 2023, with mega-rounds (transactions valued at $100 million or more) accounting for 40% of the total venture capital transaction value during the same period.

Venture debt shows signs of weakening

The report suggests that the resilience shown by the venture debt financing segment amid the global venture capital market's cooling is starting to diminish. In Africa, the number of debt financing deals was confined to 13 transactions, totaling $230 million in Q3 2023, in contrast to 20 transactions amounting to $367 million during the same period in 2022.

Breaking down investments by sub-region reveals that startups operating in multiple African sub-regions (multi-regions) secured 61% of the total investments made on the continent in Q3 2023. West Africa takes the second position with 13% of the total investment amount, surpassing Southern Africa (11%), East Africa (8%), Central Africa (5%), and North Africa (2%).

By sector, the finance sector attracted over two-thirds of the total funds (70%), ahead of the utilities sector (10%), information technology (6%), and consumer discretionary (5%).