Featured Article

Why Africa had no unicorns last year despite record fundraising haul

Africa, bucking global trends, raised more VC dollars in 2022 than 2021. But its unicorn list stayed stagnant


Image Credits: Getty Images

The African tech scene was met with fanfare in 2021: Venture capital investments in the region totaled between $4 billion and $5 billion and produced five unicorns. In my piece detailing this progress, I predicted there would be more unicorns in 2022. Those predictions proved to be way off the mark by year’s end.

Data from market insights trackers Briter Bridges and The Big Deal reveal that funding raised by African startups exceeded $5 billion (including undisclosed deals) in 2022 — a slight percentage increase from the figures reported in 2021 despite a global pullback in VC funding. And yet, no unicorns popped up throughout the year, compared to five in 2021.

That fact may appear insignificant because, at the end of the day, private valuations don’t pass an actual test till startups go public. However, producing no unicorns despite raising more venture capital suggests it’s perhaps too early to assume African markets are mature enough to consistently pop out private billion-dollar companies like their Global South counterparts: India, Southeast Asia and Latin America.

That said, 2022 was peculiar. The global economic downturn and venture capital crunch ensured that every region produced fewer billion-dollar companies than the previous year. Globally, 216 unicorns were minted in 2022, per Tracxn, compared to 541 in the previous year. In India, 22 companies became unicorns last year, compared to 46 in 2021. While 18 companies in Latin America got their horns in 2021, that figure fell to just eight last year.

Unlike Africa, these regions raised way less venture capital in 2022 than in 2021, so it makes sense that their unicorn numbers dropped. For example, in India, the number of unicorns dropped by more than half as VC activity dropped by 33%. Latin America and Southeast Asia also witnessed a double-digit decline in VC funding last year compared to 2021, though the drop in unicorns indicates more damage.

So what happened in Africa in 2022 that made it so … weird?

Pullback from mega-check writers

Africa’s lack of unicorns in 2022 could be attributed to less involvement from growth investors such as Tiger Global, Sequoia Capital and SoftBank from the continent’s markets.

After a long hiatus, Tiger Global backed five African startups in 2021, including the unicorn Series C round of African payments company Flutterwave. Except for a follow-on in Flutterwave’s Series D, Tiger Global — which made another five investments in Africa in 2022 — didn’t back any startup past the Series B stage (Wasoko’s $625 million round) last year.

While these deals fit into Tiger Global’s strategy of investing in Series A and B deals and buying larger stakes for less, they were all announced before the end of Q2. That was when the global investor announced it was set for its worst year ever in accumulated losses and sold several of its public stakes. As such, the crossover fund’s concerning performance caused it to retreat from conducting more deals.

Tiger Global is earning its stripes in Africa

It’s not farfetched to assume that at least one unicorn would’ve popped up if the hedge fund carried on with business as usual. The same can be said with SoftBank and Sequoia, which made two deals between them last year in Africa: Afriex and Apollo Agriculture. In 2021, these growth investors were notable for funding mega-rounds at insanely high valuations in companies across emerging markets (in Africa, for example, they backed four out of the five unicorns minted).

The bottom line is that in a year where VCs put money to work in record amounts, thus generating a record number of unicorn companies, Africa, just like other regions, profited from it. However, in a more stringent market, fewer mega-rounds mean fewer unicorns, and that’s what we got in 2022. African tech had 11 mega-rounds in 2021 and produced five unicorns; in 2022, it had seven — Sun King, Flutterwave (a sequel to its unicorn round), Wasoko, Interswitch, InstaDeep, MFS Africa and Yassir — and failed to birth a single billion-dollar startup.

Pipeline is limited

Three African unicorns minted in 2021 — Chipper Cash, Wave and OPay — got their billion-dollar status two to three years into their startup journeys, outlier experiences even by global standards. According to various reports, a startup takes five to 10 years to reach a $1 billion valuation.

We should remember that the unicorn rounds mentioned above were fueled by money and tech from Silicon Valley and China in venture capital’s best-ever year and that it takes much longer to hit $1 billion in valuation for an African startup — Interswitch had to wait 17 years.

To back this point: Of the 30 companies that have crossed the Series C stage (where unicorns typically start to emerge) in the last two decades, per data from Briter Bridges, more than half launched operations 10 years ago and have yet to earn their horn. This also showcases that Africa didn’t have a large enough pool of growth-stage startups that late-stage private investors like Tiger Global, Sequoia and SoftBank believed could generate massive returns.

However, this pipeline may improve due to the emergence of younger upstarts that raised multiple rounds in the last few years at valuations slightly short of $1 billion. Wasoko, Kuda, TymeBank, TeamApt, Yoco, JUMO and Yassir are some examples of these so-called soonicorns. MFS Africa, MNT-Halan and Cellulant are older companies that could be unicorns in the next two to five years.

Stricter conditions to be a unicorn

Thanks to a 13-year bull run and abundant capital in the global venture ecosystem, private valuation multiples skyrocketed to as much as 30x in 2021 or 300x in some cases. For companies that raised while money was cheap, now that the fun is over, only a handful can justify their billion-dollar valuation marks.

Unicorns face 5-1 odds as they wait for public markets to warm

As The Exchange noted in this piece: “Unicorns, many of which raised capital during the 2021 boom at valuations that no longer square with market norms, are holding off raising capital until conditions improve. The bet they are taking is that they can survive off their last cash haul long enough to make it through a valuation trough and raise on the other side, when prices improve.”

Those who can’t hold off raising capital will do so at flat or down rounds, which have become the norm of late. As startups scramble to justify their valuations, investors are looking to public markets to determine what new valuations to settle on. Most startups would need roughly $150 million to $200 million of annual revenue for a unicorn valuation to be justifiable based on today’s public market multiples.

Not many African startups can boast such numbers, which may make it insanely hard for the continent to mint new unicorns in this latest fundraising environment. As a matter of fact, the unicorns produced in 2021, like their counterparts globally, could see their valuations revised — internally or in a newly priced round — this year, just as FTX, before its bankruptcy, did with cross-border payments Chipper Cash.

A record fundraising haul for two consecutive years is no fluke. But most deals happen at the early stage due to local VC firms pulling their weight and global investors attracted to new opportunities on the continent (of the more than 900 deals executed on the continent last year, over 40% of them fell in Series A rounds and below, per data from funding trackers).

Thus, the shortage of deals around growth-stage investments means not enough investors are helping startups move up from the Series C stage, which is where billion-dollar companies are formed. Before African tech can be on par with other emerging markets in the formation of unicorns, late-stage investment deals need to increase, and this is something we’ll be tracking.

More TechCrunch

“When I heard the released demo, I was shocked, angered and in disbelief that Mr. Altman would pursue a voice that sounded so eerily similar to mine.”

Scarlett Johansson says that OpenAI approached her to use her voice

The European venture capital firm raised its fourth fund as fund as climate tech “comes of age.”

ETF Partners raises €284M for climate startups that will be effective quickly — not 20 years down the road

Copilot, Microsoft’s brand of generative AI, will soon be far more deeply integrated into the Windows 11 experience.

Microsoft wants to make Windows an AI operating system, launches Copilot+ PCs

Hello and welcome back to TechCrunch Space. For those who haven’t heard, the first crewed launch of Boeing’s Starliner capsule has been pushed back yet again to no earlier than…

TechCrunch Space: Star(side)liner

When I attended Automate in Chicago a few weeks back, multiple people thanked me for TechCrunch’s semi-regular robotics job report. It’s always edifying to get that feedback in person. While…

These 81 robotics companies are hiring

The top vehicle safety regulator in the U.S. has launched a formal probe into an April crash involving the all-electric VinFast VF8 SUV that claimed the lives of a family…

VinFast crash that killed family of four now under federal investigation

When putting a video portal in a public park in the middle of New York City, some inappropriate behavior will likely occur. The Portal, the vision of Lithuanian artist and…

NYC-Dublin real-time video portal reopens with some fixes to prevent inappropriate behavior

Longtime New York-based seed investor, Contour Venture Partners, is making progress on its latest flagship fund after lowering its target. The firm closed on $42 million, raised from 64 backers,…

Contour Venture Partners, an early investor in Datadog and Movable Ink, lowers the target for its fifth fund

Meta’s Oversight Board has now extended its scope to include the company’s newest platform, Instagram Threads, and has begun hearing cases from Threads.

Meta’s Oversight Board takes its first Threads case

The company says it’s refocusing and prioritizing fewer initiatives that will have the biggest impact on customers and add value to the business.

SeekOut, a recruiting startup last valued at $1.2 billion, lays off 30% of its workforce

The U.K.’s self-proclaimed “world-leading” regulations for self-driving cars are now official, after the Automated Vehicles (AV) Act received royal assent — the final rubber stamp any legislation must go through…

UK’s autonomous vehicle legislation becomes law, paving the way for first driverless cars by 2026

ChatGPT, OpenAI’s text-generating AI chatbot, has taken the world by storm. What started as a tool to hyper-charge productivity through writing essays and code with short text prompts has evolved…

ChatGPT: Everything you need to know about the AI-powered chatbot

SoLo Funds CEO Travis Holoway: “Regulators seem driven by press releases when they should be motivated by true consumer protection and empowering equitable solutions.”

Fintech lender SoLo Funds is being sued again by the government over its lending practices

Hard tech startups generate a lot of buzz, but there’s a growing cohort of companies building digital tools squarely focused on making hard tech development faster, more efficient and —…

Rollup wants to be the hardware engineer’s workhorse

TechCrunch Disrupt 2024 is not just about groundbreaking innovations, insightful panels, and visionary speakers — it’s also about listening to YOU, the audience, and what you feel is top of…

Disrupt Audience Choice vote closes Friday

Google says the new SDK would help Google expand on its core mission of connecting the right audience to the right content at the right time.

Google is launching a new Android feature to drive users back into their installed apps

Jolla has taken the official wraps off the first version of its personal server-based AI assistant in the making. The reborn startup is building a privacy-focused AI device — aka…

Jolla debuts privacy-focused AI hardware

The ChatGPT mobile app’s net revenue first jumped 22% on the day of the GPT-4o launch and continued to grow in the following days.

ChatGPT’s mobile app revenue saw its biggest spike yet following GPT-4o launch

Dating app maker Bumble has acquired Geneva, an online platform built around forming real-world groups and clubs. The company said that the deal is designed to help it expand its…

Bumble buys community building app Geneva to expand further into friendships

CyberArk — one of the army of larger security companies founded out of Israel — is acquiring Venafi, a specialist in machine identity, for $1.54 billion. 

CyberArk snaps up Venafi for $1.54B to ramp up in machine-to-machine security

Founder-market fit is one of the most crucial factors in a startup’s success, and operators (someone involved in the day-to-day operations of a startup) turned founders have an almost unfair advantage…

OpenseedVC, which backs operators in Africa and Europe starting their companies, reaches first close of $10M fund

A Singapore High Court has effectively approved Pine Labs’ request to shift its operations to India.

Pine Labs gets Singapore court approval to shift base to India

The AI Safety Institute, a U.K. body that aims to assess and address risks in AI platforms, has said it will open a second location in San Francisco. 

UK opens office in San Francisco to tackle AI risk

Companies are always looking for an edge, and searching for ways to encourage their employees to innovate. One way to do that is by running an internal hackathon around a…

Why companies are turning to internal hackathons

Featured Article

I’m rooting for Melinda French Gates to fix tech’s broken ‘brilliant jerk’ culture

Women in tech still face a shocking level of mistreatment at work. Melinda French Gates is one of the few working to change that.

1 day ago
I’m rooting for Melinda French Gates to fix tech’s  broken ‘brilliant jerk’ culture

Blue Origin has successfully completed its NS-25 mission, resuming crewed flights for the first time in nearly two years. The mission brought six tourist crew members to the edge of…

Blue Origin successfully launches its first crewed mission since 2022

Creative Artists Agency (CAA), one of the top entertainment and sports talent agencies, is hoping to be at the forefront of AI protection services for celebrities in Hollywood. With many…

Hollywood agency CAA aims to help stars manage their own AI likenesses

Expedia says Rathi Murthy and Sreenivas Rachamadugu, respectively its CTO and senior vice president of core services product & engineering, are no longer employed at the travel booking company. In…

Expedia says two execs dismissed after ‘violation of company policy’

Welcome back to TechCrunch’s Week in Review. This week had two major events from OpenAI and Google. OpenAI’s spring update event saw the reveal of its new model, GPT-4o, which…

OpenAI and Google lay out their competing AI visions

When Jeffrey Wang posted to X asking if anyone wanted to go in on an order of fancy-but-affordable office nap pods, he didn’t expect the post to go viral.

With AI startups booming, nap pods and Silicon Valley hustle culture are back