AVCA’s annual report shows continued investment in Africa still remarkably strong with the focus on connectivity, but participation of impact investors was lower in 2022 than in previous years.
- Deal volume grew 21%, and Africa’s venture funding market was valued at $6.5bn across 853 deals.
- Financials (31%), information technology (15%) and consumer discretionary (15%) were the three most active sectors by volume for the third year running in 2022.
- Impact investors backed companies advancing financial inclusion (17%), sustainable agriculture (16%) and clean energy solutions (16%), as well as companies improving access to quality education (10%) and healthcare (8%).
The African Venture Capital Association (AVCA) is the pan-African industry body, which promotes and enables private investment in Africa.
This week it released its 2022 Venture Capital in Africa Report, demonstrating the industry’s resilience during global economic uncertainty. According to AVCA, Africa’s 21% year-on-year growth in deal volume was three times that recorded in Asia (7%), the only other global region to record positive year-on-year growth in deal volume.
Africa’s venture funding market was valued at $6.5bn across 853 deals, including $1.3bn of venture debt. Deal volume in Africa last year experienced an industry record, highlighting a near-decade of continuous growth and a compound annual growth rate of 31% between 2014 and 2022. Contributing to this growth is the increased participation of startups raising capital for the first time, accounting for 37% of deal volume.
Impact through connectivity
Abi Mustapha-Maduakor, chief executive officer, AVCA, commented on the impact angle. “Despite lower participation by impact investors last year, as experienced globally, the impact continues to be achieved in Africa through a more connected marketplace that drives tech-enabled solutions from healthcare to education.”
This is born out by the sector report. Financials (31%), information technology (15%) and consumer discretionary (15%) were the three most active sectors by volume for the third year running in 2022.
When broken down by impact category, impact investors backed companies advancing financial inclusion (17%), sustainable agriculture (16%) and clean energy solutions (16%), as well as companies improving access to quality education (10%) and healthcare (8%).
Amongst impact companies receiving funding and their sponsors highlighted in the report were ImaliPay, a financial services platform for Africa’s gig workers, with participation from Change Com; Komaza, a Kenyan innovative smallholder forestry platform, co-led by Sobrato Philanthropies; Solarise Africa, a pan-African Energy-as-a-Service company, backed by the Electrification Financing Initiative; and Zeraki, a Kenyan EdTech startup led by Acumen Fund.
The volume of early-stage (Series A and B) investment deals grew by 25% between 2021 and 2022, increasing median deal value to $10m, the highest globally. With over three-quarters of Africa’s funding originating from foreign investors, AVCA’s research indicates sustained investor confidence in the region.
The report details how 8% of early-stage investments were made in the same company more than once in 2022, while 409 unique companies received additional venture capital following investments in previous years. AVCA stated “continued investments contribute to the sustainability of these companies, the employment they generate, and the increasing impact they deliver, catalysing more robust commercial and social ecosystems.”
Interestingly, over a quarter of startups that received venture financing were either female-founded or included at least one female in the founding cohort raising a cumulative total of close to $950m.
Mustapha-Maduakor continued: “Intuitive entrepreneurs and efficient capital allocation are transforming lives as a maturing VC industry continues to create longevity and opportunities for African industries and societies to reshape the future.”