Discover more from Africa: The Big Deal
Last continent standing 🥊
With +125% YoY quarterly growth, Africa is the only continent not to record a significant YoY contraction this quarter
Like we had done a few weeks ago for Q1, as soon as the numbers were out, we had to go back and compare the performance of Africa to other regions’ for Q2. And the situation is quite dramatic. If we look at YoY evolution of quarterly funding* (i.e. comparing Q2 ‘22 to Q2 ‘21), Africa is simply the only region that continued growing YoY. And we’re talking significant growth here: in Q2 ‘22, start-ups in Africa have raised 2.25x times (i.e. +125% YoY) the amount that they had raised a year before ($1.3bn+ vs. <$600m). In the meanwhile, funding declined by -29% YoY globally, with the US, Asia and Europe all recording a decline in the high twenties, and Latin America registering a -69% YoY freefall. Back in Q2 ‘21, start-ups in Latin America had raised nearly 13x times more than start-ups in Africa ($7.4bn vs. <$600m), and it felt like for Africa to compete with its transatlantic neighbour was completely out of reach; a year later, the gap - 1.75x times - has narrowed significantly. Now Africa has her work cut out for herself in Q3 as Q3 ‘21 was particularly impressive in terms of funding; if it cannot keep up - and raise at least $1.8bn in Q3 ‘22 -, the continent could be registering its first quarter of negative quarterly YoY growth in a long time, and in doing so validating the opinion of many analysts that the continent is in fact only on borrowed time…
* I think it’s worth highlighting why we are focusing on YoY quarterly growth, as opposed to QoQ growth. The main reasons behind this choice are to focus on long-term (as opposed to short-term) trends, but maybe more importantly to eliminate the seasonality effect. Indeed, funding in Africa tends to slump in Q2. It happened it Q2 ‘22 (-28% QoQ), but it had happened in Q2 ‘21 before in comparable levels (-20% QoQ) and also in Q2 ‘20, much more dramatically (-63% QoQ). And at the time, no one was talking about a decline in start-up funding on the continent. In short, we consider negative Q2 QoQ growth to be more of a seasonal event which cannot be used - on its own at least - to conclude that funding activity is - or will be - slowing down.
I’ll just conclude briefly by dropping the link to the CB Insights report (always an interesting read) and to our database of deals (2019-now), which you can access here at a discount, as always. See you next week! Max
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