Funding for African Tech Start-ups Drops 54% in Q3

The level of funding for- and value in deals with African tech start-ups fell by 54% and 13% respectively on a quarter-on-quarter basis for the period to the end of September 2022 – this despite continued interest in e-commerce, internet software and Fintech.

New data from CB Insights released this week shows that venture capital flows into African start-ups fell to US$367-million for the third quarter period to September, compared to the June second quarter period.

Funding in the comparable quarter in 2021 amounted to US$1.2-billion.

The number of venture financing deals for African tech start-ups also fell 13% from 135 to 117. In the same quarter last year, deals for regional start-ups topped 140.

Yet VC and African start-up business leaders believe there is still money available for the right tech start-ups across Africa – although funders are now more risk aware, especially at a time when global economies are struggling against high interest rates.

The report identified Launch Africa, with investments in six companies, UM6P Ventures (four companies invested in) and AfricInvest, with three private equity deals as the top investors in African tech ventures during the third quarter 2022 period. Other investors included Entrepreneurs for Entrepreneurs Africa, Huobi Ventures, KuCoin and LoftyInc.,among others.

Egypt, Nigeria and South Africa remain the top three African venture capital markets.

TeamApt (US$50-million), Scorefam (US$25-million and VendEase (US$7-million) were the top venture capital investees in Nigeria.

In Egypt, e-commerce companies Homzmart, with US$23-million, Cartona which raised US$12-million and OneOrder which bagged US$7-million had the highest capital raises for the period under review.

South Africa’s iiDENTIFii, with US$15-million, SweepSouth (US$11-million) and DataProphet which raised US$10-million topped the biggest funding raises list in the country.

According to Africa: The Big Deal, Africa-based venture capitalists are stepping up funding for regional start-ups.

It said this week that “more than half of $1 million+ deals in Africa since 2019 have had at least one Africa-based investor” as one of the main investors.

“Africa-based investors are more active in deals with start-ups headquartered in one of the Big Four (involved as a main investor in 59% of $1m+ deals since 2019) compared to those headquartered elsewhere (37%). They are particularly active in Egypt (67%), South Africa (65%) and Nigeria (59%); less so in Kenya (47%).”