Startups

Africa’s startup market is bucking the global slowdown

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Image Credits: Nigel Sussman (opens in a new window)

Parsing the latest data on the startup fundraising market in Q2, TechCrunch has explored the global perspective, taken a closer look at fintech, asked how much dry powder VCs have and brought the latest from unicorn land. But we are not yet done.

Later this week, we’re looking at the European venture market, which is faring a little better than many other major startup hubs. But Europe is not doing the best — that honor may belong to Africa. Data indicates that Africa is not only posting year-over-year gains in venture capital fundraising, it could also be on track for a record year.


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Regional discrepancies abound in a changing global market, but today, instead of merely tracking which areas are declining the fastest when compared to 2021, we have some more positive data to chew on.

Leaning on a report from CB Insights, let’s get our minds around Africa’s strong second quarter and what the changing median deal size means for startups on the continent.

Investor demand for African startups holds up

Recall that the global venture market went crazy after the early COVID era left investors in a low-cost money environment with fewer industries than normal to back. Idle capital pumped tech stocks and poured into venture funds. The resulting valuation boom led to perhaps excessive amounts of VC money flowing into private tech companies.

Fast-forward to today and most of the world is in reset mode, nursing the hangover of last year’s exuberance. Not in Africa, though, where things are still accelerating.

CB Insights counts some 298 ventures deals through Q2 2022 in Africa this year, worth some $1.7 billion. While that’s a modest figure compared to say, the United States’ own startup investing climate, the region is on track to set new records this year. For context, African startups raised $2.4 billion across 530 deals last year — which was a record year, with 2018, 2019 and 2020 recording just $2.2 billion worth of venture funding in aggregate.

What’s more, there’s no indication that a strong Q1 was doing all the work. The second quarter of venture investment in Africa was robust, despite being slightly slower than Q1 highs. The second quarter saw the continent hit its third-largest quarterly venture dollar haul, and its fourth-largest sheaf of deals on record.

What’s more the $794 million raised by African startups in Q2 2022 was over three times the amount it raised a year ago. Indeed, in both Q1 and Q2 of 2021, African startups raised just under $250 million per quarter.

On a less positive note, Q3 2021 appears insurmountable when we consider the sheer amount of money raised ($1.25 billion). And, African deal volume peaked in the first quarter of this year, meaning that the second quarter was strong but not outstanding compared to recent superlatives.

However, 2022 looks like a record in the making, so quarterly gyrations matter a bit less than they would in a more stagnant market. The strength of the African venture ecosystem is obvious, at least in the first half of the year.

Taking a more pessimistic view, deal volume fell more sharply in Africa than dollar volume in the second quarter, meaning that deals are getting larger. Median deal value in Africa is at an all-time high so far this year at $4 million, the CB Insights report says, and therefore more late-stage focused (though accelerators and other early-stage activity could impact totals here). So we do have some reason to worry that seed-stage startups in Africa may find it slightly harder to raise money than the top-level numbers would otherwise lead us to believe.

Still, seeing a more nascent startup market attract ample late-stage capital is hardly something to complain about.

So what?

I have a new theory about why we’re seeing some markets retreat while others forge ahead. Put simply, regions that had the most mature conduits to bring capital to startups saw the most insane fundraising results. Ease of access to capital meant that investments were insanely aggressive last year in the United States — thanks to lots of money and a more entrenched startup investment cycle — and, to a lesser degree, in Europe.

African startups lacked similar levels of pre-built funding channels, so they had to endure less of a comedown. This is at once good news (African startups are still posting funding gains! We’ll see more records set this year!), but it also speaks to how underfunded African startups have been for so long.

TechCrunch is looking more deeply into who is funding African startups, so expect more on the matter. But from where we sit today, awash in venture data from around the world, it certainly does seem that Africa is in better shape than most regions we track.

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