Startups raising their first round of venture financing accounted for 37% of VC deal volume in 2022, a new report by the African Private Equity and Venture Capital Association (AVCA) says.
This came amid a 1% decrease in venture capital investments in Africa to $6.5 billion in 2022 even though the continent fared much better than the rest of the world, which saw a 32% contraction in global venture capital.
Africa raised $5.2 billion in venture capital across 786 deals in 2022, representing 3% of the total volume and 1.2% of the total value of global venture funding in 2022, the report says.
“While the global venture market experienced significant contractions in startup funding to varying regional degrees, Africa’s venture ecosystem was relatively stable and only experienced a funding drop of less than $50 million compared to 2021.”
The majority of deal-making in 2022 was follow-on (i.e., repeat or subsequent financing of companies) rather than first-time financing, with 62 unique companies (8% of total) recipients of more than one round of deals in 2022 specifically. 409 unique companies that each raised follow-on venture capital funding had raised previous rounds before 2022.
Amongst first time recipients of capital, 52% of transactions were at the seed stage, with only a small cohort (4%) of first-time capital recipients doing so at the early-stage (i.e. Pre-Series A or Series A transactions).
Deals at the seed stage were also the largest-growing market segment in 2022, demonstrating YoY growth of 45% to stand at 355 (up from 245 deals in 2021). The median value of deals in this category also rose to $1.5 million in 2022 from $1.0 million in 2021, the report found.
“The sheer breadth of pre-revenue startups seeking early-stage development capital has created a demand for seed financing in Africa. Considering there were well over 900,000 new business registrations in Africa in 2020 alone , the predominance of this investment stage shows no sign of future abatement.”
The financial sector was a key driver of investment activity in Africa, accounting for 42% of transaction value and 31% of deal volume in 2022. Although 15 significant investments in firms drew a total of $2.2 billion, the median deal size across all investment phases was $2 million.
In terms of the number of deals per country:
- Nigeria tops with 172 deals
- Egypt (117)
- South Africa (110)
- Kenya (102)
Nigeria also tops with 22% of the value of funding arriving into companies headquartered on the continent.
You can find the full report here.
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