Start-ups in Africa raised $3.1bn in the first half (H1) of 2022, hitting new milestones with a record second quarter (Q2), June and H1 figures. This is the biggest finding from a new report by Africa: The Big Deal, a database tracking and sharing insights on start-up funding on the continent.
According to The Big Deal, African startups have gathered more funds than what they got in Q2 2021 ($531m), June 2021 ($56.6m) and H1 2021 ($1.35bn). At the end of June 2022, African start-ups had raised $152.8m, 2.7x more than June 2021.
The African tech ecosystem also recorded its strongest Q2 ever, a 2.3x increase. Start-ups raised $1.3bn during the period. The notable progress carried on into H1 2022, with the start-ups attracting $3.1bn. This represents a 2.4x leap from H1 2021 figures.
The ‘Big Four’ maintain dominance
The African tech ecosystem is significantly shaped by activities in Nigeria, Kenya, South Africa and Egypt. These countries answer the “big four of African tech” moniker.
Since 2019, start-ups operating in the big four (Nigeria, Kenya, South Africa, and Egypt) have raised 83 per cent of all funding and signed 78 per cent of all $1 million-plus deals., and there is no indication that things will change anytime soon.
The percentage contributions of these markets have been very consistent over time.
Market factors could shape Q3 numbers
The third quarter (Q3) could be a decisive quarter, especially given how strong it was last year, but there is definitely room for optimism.
According to Max Cuvellier, GSMA’s head of Mobile for Development (M4D), “There’s no denying that the context is difficult and between inflation, food insecurity, bear markets, supply chain issues, and more, African start-ups will be impacted in their growth and capacity to raise.”
‘H2 2022 is looking good’
In the first ten days of H2, African start-ups have already raised nearly $150 million. This is despite “down rounds, mass layoffs, bankruptcies” and other nerve-racking developments in the global tech scene.
With this figure, it’s safe to predict that the current funding boom in Africa will continue to expand rapidly before the end of the year.
Fintech continues to call the shot
Of all the sectors featured in the report, fintech remains the most funded tech segment in the African tech ecosystem.
32 per cent (half) of the funding realised in the H1 of 2022 went to fintech startups, which is higher than in previous years where most of the fintech funding was raised in H2, 89 per cent of it in 2019, and 76 per cent in 2020.
Among the largest beneficiaries of fintech capital raised are Opay, Flutterwave, TymeBank, Jumo and MNT Halan. With the incremental funding for fintech in Africa over the years, capital injected into these startups is only likely to increase with deepening mobile phone usage and internet penetration.
Without a doubt, start-ups in Africa will be affected in their growth and capacity to raise in the second half of the year. And this is tied to rising inflation, food insecurity, bear markets, supply chain issues among other issues on the continent.
Q3 will be decisive – especially because it was so very strong last year – but there is definitely room for optimism. In all of these, it’s pretty much easy to miss how far start-ups in Africa have gone with funding this year.
Hopefully, the growth from H1 flows into the second half of the year via more interest in the continent’s start-ups.
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