According to a new report from the Africa Private Equity and Venture Capital Association (AVCA), the continent’s largest economy attracted the highest volume of venture capital investments totaling $6.5 billion in 2022.
Nigeria outpaced four other nations that made the top list, according to the pan-African industry association, which encourages and facilitates private investment in Africa, to account for 22% of the 853 investment deals worth over $6.5 billion on the continent.
“Africa’s largest economy and most populous country maintained its status as the most funded country in 2022, while Egypt (15 percent) rose in rank to second place, eclipsing South Africa, which drew 14 percent of Africa’s VC deal volume last year,” according to the AVCA’s study.
According to the report, consumer discretionary, financials, and information technology were the three most active sectors by volume for the third consecutive year in 2022. These three sectors together accounted for just under two-thirds of all VC deals made on the continent last year.
According to the report, “African entrepreneurs are not only bringing new products and services to market; they are also modernizing their distribution and accessibility beyond the upper-middle class to Africa’s expanding cohort of young, urban, and connected workers.”
In comparison to 2021, when $5.2 billion was raised from 722 different companies, the research stated that 2022 saw a very modest reduction (1 percent) in the total amount raised by African startups.
The venture ecosystem in Africa, it added, “held on to 2021’s funding high, proving its ability to shoulder shock and weather unpredictability; first through the Covid-19 pandemic and now through the general decline in the global economy.”
According to the AVCA, companies in Africa collected $1.3 billion in venture debt in 2017 using a range of funding methods, including direct lending, convertible loan notes, mezzanine financing, and more.
According to a repeating pattern, the seed stage assumed the greatest share of venture capital deal activity in Africa last year, accounting for about half of the venture deal flow to firms on the continent, it added.
According to the report, 131 early-stage venture capital deals took place in Africa in 2022, demonstrating a 25 percent increase from the year before when 105 early-stage deals were concluded on the continent.
Additionally, it revealed that in 2022, investors invested $1.1 billion across 16 late-stage acquisitions, a 6 percent volume decline and a 51 percent value decline.
“However, despite this slowing in late-stage fundraising, a number of high-profile late-stage deals occurred last year, including the $250 million Series D round of funding for Flutterwave in February 2022 and the $260 million Series D round for off-grid solar energy supplier Sun King. The paper cited the South African chat commerce service Clickatell’s $91 million Series C round as another noteworthy transaction.
This expanding sample, according to the article, also demonstrates how firms have been raising larger early investment rounds concurrently.
“The continued prominence of seed-stage deals in Africa’s venture capital landscape lies partially in the surge in entrepreneurial activity being seen across the continent,” the AVCA said.
The report said global investments in venture capital reached $445 billion in 2022, a 32 percent decrease after a record year of growth for this asset class in 2021.
According to the AVCA, “the global venture capital fell victim to persistent market instability, which was aggravated by geopolitical crises, supply chain breakdowns, and unprecedented inflationary pressures, which led to an increase in interest rates.”
These elements combined to have a detrimental impact on venture capital deal flow. The decline in investments both internationally and in Africa becomes apparent in the second part of the year.
According to the analysis, deals that took place in the first half of 2022 will account for two-thirds (67%) of the venture deal value in Africa.
In 2022, it was claimed that thousands of jobs would be lost due to a global IT industry downturn.
“Although industry layoffs were in part due to market instability and declining revenue resulting from falling consumer demand, a large number were also due to necessary streamlining of workforce after inflated hiring during the COVID-19 pandemic to cope with heightened demand,” the AVCA said.