African start-ups attracted increased funding during the six months to June 30 this year, defying a difficult operating environment plagued by rising inflation, weakening currencies, and rising interest rates that have seen foreign investors shift capital from emerging and frontier economies.
Latest report by African Private Equity and Venture Capital Association (AVCA) shows that 445 venture capital (VC) deals valued at $3.52 billion were completed by 300 unique companies in the six months compared to 259 deals valued at Ksh1.57 million in the same period last year.
This represents a 72 percent and 124 percent growth in the number and value of VC deals during the period under review.
According to the report the impressive growth in start-up funding, which goes against the grain of global trends this year, is as a result of a concerted effort by African governments in recent years to nurture vibrant and supportive ecosystems, enabling entrepreneurship and investment to thrive.
These government efforts, according to the report, which was released last week, include the Zambian government’s bid to transform the country into a regional start-up hub and “the Singapore of Africa” and the launch of Silicon Zanzibar7 by the Tanzanian government exemplifying the commitment to creating enabling environments for African start-ups to thrive, remain competitive, and attract commercial capital.“Africa’s venture ecosystem has shown bullish trends despite surging inflation and an unfavourable macroeconomic climate,” according to the report dubbed, AVCAs 2022 Venture Capital in Africa.“While the head and tailwinds of the final quarter of 2022 remain to be seen, the rising tide of venture capital in Africa in 2022 H1 affirmed this optimism for the industry at the start of the year.”
The report shows that Kenya topped its East African peers in attracting funding for its start-up businesses during the period.
The report shows that EA attracted 22 percent (98 deals) of the total VC deals, with Kenya completing 54 valued at $330 million, followed by Uganda (10 deals valued $41 million) and Tanzania (6 deals).
A start-up is young company with a business model that supports innovation while venture capital is funds invested to support these businesses in which there is a substantial element of risk.
West Africa attracted the highest portion (33 percent) of the total number VC deals in the continent, followed by East Africa (22 percent), North Africa (20 percent), Southern Africa (14 percent), multi-Region (10 percent) and Central Africa (one percent).
Of the 42 multi-region VC deals that took place in the first half of this year, 16 deals (38 percent) were in companies that pursued geographic diversification via direct business expansion, while 15 (36 percent) were in companies that have leveraged mergers and acquisitions to facilitate their regional expansion, indicating the dynamism of the plan.
According to the report Nigeria recorded the highest number of VC deals (101) valued at $285 million followed by Egypt (63 deals valued at $352 million), Kenya (54 deals at$330 million) South Africa (50 deals at $131 million) and Ghana (21 deals at $133 million).
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