Behind the clouds is the sun still shining 🌤

A quick look back at start-up funding trends in Africa throughout 2022

Start-ups in Africa have raised more funding in 2022 than in 2021, or in any previous year for that matter. Yet it feels like the news isn’t being celebrated as much as it should, as if it were somehow bittersweet. There’s a hint of ‘Yes, of course it’s good… But it could have been so much better!’ in many a commentary. In fact, there is some truth to this feeling. Let’s rewind the year to understand why:

• Before Q1 even started, hopes were up so high. Indeed, H2 2021 was simply phenomenal with $3.3bn raised, 2.4x times what had been raised in H1 that year. Many hoped the growth would continue, and confidently predicted the ecosystem to hit $6bn in 2023, possibly $7bn; some even dreamed of $10bn.

• 2022 started, and within 7 weeks the $1bn was reached. Q1 delivered $1.9bn, the strongest quarter ever! While clouds started gathering in the distance (with signs of a slowdown in other parts of the world, and war starting in Ukraine), rain wasn’t anywhere near Africa’s parade.

• With a total of $1.3bn, Q2 was good. But not as good as Q1. Yet, nothing unusual as the ecosystem had experienced a dip between Q1 and Q2 every year since 2019. With $3.2bn, H1 almost topped H2 2021, and was the most successful H1 ever, smashing the previous H1 record in 2021 by a factor of 2.4x. By the end of Q2 2022, start-ups had raised $1.9bn more than at the same time in 2021.

• Those aforementioned clouds were getting closer - and darker - though… By the end of Q3, with $900m raised Africa - like every other region - started showing negative YoY quarterly growth. And because Q3 was when things had really started to heat up in 2021, by the end of the quarter the $1.9bn lead compared to 2021 had gone down to $900m.

• The flagging continued in Q4 ($750m). Once at $1.9bn at the end of June, the difference in funding raised between 2022 and 2021 had melted down to just over $220m.

So Yes, 2022 was definitely a good year, yet with talks of slowdown and uncertainty dominating the second half of the year, the mood isn’t always that celebratory. Not to mention that if the H2 trend were to continue, 2023 could be the first year of decline in absolute numbers for the ecosystem. But with a lot of capital ready to be deployed, let’s hope that when the clouds eventually part, the ecosystem will take advantage of this to show us once again it’s got more than one trick up its sleeve…

As per the results of the poll, the first regional map of our series this week will be… 🥁🥁🥁… Western Africa. And next week, I will most probably focus on 2022 trends from a sector point of view and look into how funding overall managed to grow despite a decrease of almost $700m YoY in fintech funding (!). But if you can’t wait and want to do your own analysis, here’s the link to access the full database with a discount. See you all on Thursday then ;)