Discover more from Africa: The Big Deal
Bottom of the class No More. 🧗♂️
In Q1'23, start-ups raised more funding in Africa than in Latin America, probably for the first time ever.
First, let’s get the naysayers’ arguments out of the way. Yes, the global context is pretty depressing: in Q1’23, VC funding globally was about a third of what it was back in Q1’22 (-61% YoY), when things had already started to go south in the US and Asia. And Yes, Africa only still represents a meagre portion of global VC flows (somewhere around 1.5% or 2%), below the continent’s contribution to global GDP (just under 3%) and share of global population (~17%).
Now we can focus on the positive: despite the headwinds, Africa is resisting much better than all other regions. Since the beginning of the downturn in Q1’22, it is the only region where the quarterly YoY growth in start-up funding has outperformed the global average every single quarter (as usual we focus on YoY - as opposed to QoQ - trends as they take into account seasonality). In Q1’23 for instance, funding in Africa was 29% lower than the same period a year before; as a comparison in the US it was more than halved (-54% YoY), in Asia divided by three (-65% YoY), and in Latin America by a factor of five (-80% YoY).
The comparison with Latin America is certainly the most relevant, both in terms of volume and stage of ecosystem development. Historically, Africa has trailed behind LatAm: in 2021, $20bn+ were raised in South America, more than 4x the African total ($4.5bn). But that spread reduced quickly in 2022, when Africa held up much better than other regions, while Latin American numbers nosedived. By the end of the year, start-ups in LatAm had raised ‘only’ about 50% more than their African counterparts ($7.7bn vs. ~$5bn). And then it finally happened: in Q1’23, start-ups raised more funding in Africa than in LatAm!
But will this continue in Q2…?
As usual, our global comparison analysis is based on CB insights’ State of Venture numbers (high-level Q1’23 stats can be found here), where we just replace their African numbers with ours. Their full deck and underlying Excel are now behind a paywall though, which encouraged us to take a big decision: this newsletter will from now on be a paid product… Just kidding! For the newsletter, we will continue to get ‘paid’ in positive feedback and shares (which our landlords are yet to accept as currency). If you want to access the full database however - with close to 100k data points -, there is a small fee (even smaller with this discount) which adds up to about the average price of a coffee in Paris per week…
Thanks for reading Africa: The Big Deal! Subscribe for free to receive new posts and support my work.