For the first time, 2022 was another record year for funding activity in the African tech startup ecosystem, with total investment passing $3 billion, the latest report by Disrupt Africa has shown. This is exceptional in the funding value and also because it came at a time of global economic meltdown affecting VC funding far and wide.
Not only has the African tech ecosystem experienced tremendous growth in less than a decade, but it has also shown resilience in the face of multiple global crises. In Disrupt Africa’s debut report for tech funding in 2015, 125 tech startups raised $185,785,500 in funding. Seven years after, the number of startups and funding value has surged. And in 2022, 633 startups raised $3,333,071,000, representing a 1,694 per cent increase.
While growth slowed due to the economic meltdown in 2022, the number is a record. The reason for this is not unrelated to the increasing interest of investors in the nascent tech ecosystem on the continent, with so much potential. In the report, there were at least 987 different disclosed investors in African tech startups for 2022, up 216 (28%) on the 771 tracked in 2021. Some top investors include Launch Africa Ventures, YCombinator, Flat6Labs, LoftyInc, Techstars, and Startup Wise Guys. Also, successful African founders such as Paystack’s Shola Akinlade and Flutterwave’s Olugbenga Agboola are also active investors.
The over $3 billion funding was raised in 27 countries and across 15 different tech sectors. As usual, the ‘big four’ countries championed the funding recorded, with Nigeria getting $976,146,000, Egypt $811,945,000, Kenya $574,809,000, and South Africa $329,707,000.
The record for the largest round ever raised by an African tech startup was surpassed in 2022, with Nigerian fintech startup Flutterwave topping its own 2021 record with a $250 million raise in February. Standout amounts were also raised by Nigerian mobility fintech company Moove (US$181.8 million), Egyptian fintech platform MNT-Halan ($150 million), Algerian super app Yassir ($150 million), Kenyan retail-tech startup Wasoko ($125 million), Tunisian AI startup InstaDeep ($100 million), South African e-commerce compClickatell ($91 million), and Kenyan PAYG solar company M-KOPA ($75 million).
The “big four” share of the funding pie decreases.
The bulk of the total funding gotten annually in the African tech ecosystem has always been distributed amongst South Africa, Nigeria, Kenya and Egypt. But there is presently a little twist. Although the bulk of funding activity took place in these markets, there is growth in activity across many other ecosystems. So funding is gradually becoming decentralised, opening the continent to wider and fairly distributed opportunities.
In 2021, 80.1 per cent of funded ventures hailed from Egypt, Kenya, Nigeria or South Africa, but in 2022 that declined to 75.8 per cent. Meanwhile, the proportion of total funding raised by these markets is also decreasing. In 2022, “big four” startups raised 80.8 per cent of the annual total, down from 92.1 per cent in 2021.
Tunisia and Ghana, which raised $148,572,000 and $119,936,000 respectively, trailed the big four countries, suggesting the possibility of a “big five” or “big six” in 2023.
Fintech is losing its absolute dominance.
At the mention of the African tech ecosystem, what easily comes to mind first in this vast space is fintech. As a result of the many players in the space, the continent is experiencing a rapid proliferation of digital instant payment solutions across the different sectors of its economy. This is unsurprising as seamless payments, especially cross-border, are one of the key challenges faced by the continent. So fintech players are currently building financial networks to onboard the 57 per cent of Africans who do not hold any form of bank account.
As always, the fintech sector powered Africa’s startup funding revolution, posting another record-breaking year, but its share of total funding declined as other spaces saw notable advancements. In all, 205 fintech startups (32.4 per cent of the total number of startups) raised an extraordinary $1,446,794,000 – 43.4 per cent of total funding. However, last year, the space attracted $1,038,456,500, which made up 48.3 per cent of the 2021 funding.
Although total fintech funding increased, its overall share of investment dwindled. Non-fintech startups still raised the majority of the capital, with many sectors enjoying bumper years. Nearest competitors like e-commerce, retail-tech, and e-health, well-established in second and third place, are experiencing faster growth than fintech.
A long journey to achieving gender parity.
While the tech ecosystem on the continent is doing great in many areas, it still has a wide gender gap to bridge. Only 128 (20.2%) of the 633 funded African tech startups have at least one woman on their founding team, which is up from 121 in 2021 but still represents a percentage decline from 21.5 per cent.
In Nigeria, 37 of the funded startups in 2022 (20.6%) had at least one female co-founder. This is down from the 24.2 per cent of the startups funded in 2021. Similarly, Egypt did not perform well with gender representation, with just 18 funded startups having at least one female co-founder (13.7%). Kenya, Morocco, South Africa, and Tunisia had 26.4%, 21.7%, 25.9%, 23.1%, and 21.7% in this regard.
Advancing women’s equality is paramount to the African tech ecosystem, as it is the only sure way of maximizing the wealth of opportunities therein.