With many dry powder and growth reservoirs, 2022 can resist the global trend
Can African technology immune to the global funding slowdown? It sounds like a counterintuitive question to ask. “Africa, which is home to several economies based largely on natural resource exports, has historically been the opposite of being immune to global shocks,” noted Briter Bridges director Dario Giuliani.
And yet the data is here: African startups had a very solid Q1 2022 in terms of VC investment, both in dollars and deal volume. This in itself is news, but all the more so as venture capital financing in the US, Asia and Latin America declined simultaneously.
It’s worth bearing in mind that we’re only talking about a small portion of the global VC business. According to the latest Venture Trends report from CB Insights, African startups attracted just 1% of all funding last quarter, with a deal share of 2%. Still, the fact that it tends the other way, like most of the world, is curious.
To understand what enabled Africa’s strong Q1 funding and what it could predict for 2022, we spoke with Giuliani, whose intelligence agency, Briter Bridges, gathered interesting data that we compared with the CB Insights report. And for the VC perspective, we gathered notes from Tidjane Dème, general partner at Partech, and from the team at Ingressive Capital.
A strong start to 2022
According to Briter Bridges, $1.77 billion in VC funding went to African technology in the first quarter of 2022. That’s close to the $1.8 billion estimate from the Africa-focused newsletter The Big Deal, but much higher than CB Insights’ total – $923 million.
The discrepancy between these different counts is quite easy to explain: CB Insights bases itself on the location of its headquarters, regardless of a startup’s major markets. For example, it views companies like Flutterwave and Clickatell as American entities, while Briter Bridges views them as part of Africa’s technology. Since the former recently raised a $250 million Series D round and the latter a $91 million Series C, this has a pretty big impact on the calculations.
The fact that including or excluding a handful of deals can affect the numbers so much is also a good reminder to put things in perspective. With growth “powered hugely by mega-deals,” Giuliani said, “the quarterly forecasts are statistically inaccurate because they don’t reflect predictable patterns.”
In addition, “closing” [deals] usually takes a bit more time in Africa, which leads to a greater backlog of data.” noted Deme. “Several deals announced in Q1 were in fact closed in Q4 – meaning we could be looking too early for signs of a slowdown that will only manifest in future numbers.
That said, we still think it’s important to see that VC funding in Africa has had such a strong year so far. The $923 million CB Insights counted was split between 170 deals. If 2022 continued at the exact same pace, that would be $3.692 billion and 680 deals — a higher total in both respects than 2021’s $2.285 billion volume and 529 deals, both of which were annual records.