(Ecofin Agency) - More than three-quarters of the investors who invested in African startups in 2022 were venture capitalists. This inflow allowed the continent to withstand the market cooling caused by economic uncertainties and geopolitical risks better than the other continents.
U.S. and U.K. investors accounted for 49.2 percent of the venture capital industry players who injected funds into African startups in 2022, according to a report released on April 20 by the African Private Equity and Venture Capital Association (AVCA).
According to the report, 1,087 investors were active in the African venture capital landscape that year, up 14 percent compared to 2021.
The United States topped the ranking of investors’ origin with 436 investors (40.1%), ahead of the United Kingdom (9.1%), South Africa (6.9%), Nigeria (5.5%), Egypt (4.3%), the United Arab Emirates (3.9%), France (3.1%), China (2.9%), and Kenya (2.6%).
Overall, 77% of the venture capitalists that invested in African startups were outside the continent, with the remaining 23% based in Africa.
The report further reveals that venture capital players invested $5.2 billion in Africa in 2022, down 1% compared to 2021.
Including venture debt, which is now growing faster than traditional equity investment, the total amount of funds injected into start-ups operating on the African continent rises to $6.5 billion. In fact, 67 deals involving debt instruments were completed in the past year, for a total amount of $1.3 billion.
The AVCA also points out that Africa has withstood the global venture capital market's cooling better than any other region. Very sharp declines in investments were indeed recorded in Latin America (-59%), Asia (-35%), North America (-32%), and Europe (-23%).
15 mega-rounds for a cumulated $2.2 billion
In 2022, Africa attracted 786 venture capital deals, which represents a 21% rise compared to 2021. The inclusion of debt financing transactions, such as mezzanine financing, direct loans, and convertible loans, brought the total number of deals closed last year to 853.
Year-on-year, the average deal size rose 43% to $2 million. Fifteen mega rounds were recorded for a cumulated $2.2 billion in funding raised. A breakdown of investments by subregion shows that North Africa attracted $1.1 billion in investments last year, ahead of East Africa ($899 million) and West Africa ($843 million).
Startups operating in Southern Africa raised $481 million, while those operating in Central Africa raised only $48 million from local and international venture capitalists.
Investments in start-ups operating in more than one subregion (multi-regional) reached $1.84 billion, representing 36% of overall investments attracted by the continent.
The sectoral breakdown of investments made by venture capitalists across the continent also shows that the finance sector captured the most funds (42%), followed by manufacturing (16%), information technology (13%), consumer discretionary (10%), and utilities (10%).