Could African tech be immune to the global funding slowdown? It sounds like a counterintuitive question to ask. “Africa, being home to several economies largely based on the export of natural resources, has historically been the opposite of immune to global shocks,” Briter Bridges director Dario Giuliani pointed out.
And yet, the data are here: African startups had a very solid Q1 2022 in terms of VC investment, both in dollars and in deal volume. This is news in itself, but even more so when venture funding was simultaneously declining in the U.S., Asia and Latin America.
It is worth keeping in mind that we are only talking about a small fraction of global VC activity. According to CB Insights’ latest Venture Trends report, African startups attracted a mere 1% of all funding last quarter, with a 2% deal share. But still, the fact that it is trending in the other direction as most of the world is curious.
To understand what made Africa’s strong Q1 funding possible, and what it could augur for 2022, we talked to Giuliani, whose intelligence firm, Briter Bridges, collected interesting data points that we contrasted against CB Insights’ report. And for the VC perspective, we collected notes from Tidjane Dème, general partner at Partech and from the team at Ingressive Capital.
A strong start to 2022
According to Briter Bridges, $1.77 billion of VC funding went into African tech in Q1 2022. That’s close to the $1.8 billion estimate of Africa-focused newsletter The Big Deal, but much higher than CB Insights’ tally — $923 million.
The discrepancy between these different counts is fairly easy to explain: CB Insights bases itself on HQ location, regardless of a startup’s main markets. For instance, it considers companies like Flutterwave and Clickatell to be U.S. entities, whereas Briter Bridges sees them as part of Africa’s tech. Considering that the former recently raised a $250 million Series D round and the latter a $91 million Series C, this has a pretty big impact on calculations.
The fact that including or excluding a handful of deals can sway numbers so strongly is also a good reminder that things need to be put into perspective. With growth “vastly driven by mega-deals,” Giuliani said, “quarterly predictions are statistically spurious because they don’t reflect predictable patterns.”
In addition, “closing [deals] typically takes a bit more time in Africa, leading to a greater lag in the data.” Dème noted. “Several deals announced in Q1 were in fact closed in Q4 [2021]” — which means we could be looking too early for signs of a slowdown that will only manifest itself in future numbers.
With that said, we still think that it is significant to see VC funding in Africa have such a strong year to date. The $923 million that CB Insights counted was distributed across 170 deals. If 2022 were to continue at the exact same pace, that would be $3.692 billion and 680 deals — a higher tally on both counts than 2021’s $2.285 billion volume and 529 deals, both of which were yearly records.
