The year 2022 was challenging. Global uncertainty, widespread volatility, and the hesitant management of the aftermath of an unprecedented pandemic have shaken people, businesses, and nations worldwide. Amid high inflation, the war in Europe, the global energy and supply chain crises, and the threat of a looming recession, it has been a tough year for all, let alone the startup ecosystems. The past year saw global venture funding fall in various markets and sectors, while the six largest U.S. tech stocks, worth about $10.7 trillion at the end of 2021, lost nearly $3.8 trillion in market cap.
This was a rough year for technology companies all over. But Africa remained a little more resilient than other continents, giving smart founders some breathing time to adjust, prepare and position themselves to ride the waves ahead. Operating in a geography of relative scarcity, fragile economies, and fluctuating market conditions, African start-ups are, by design, built to withstand conditions that start-ups in mature markets struggle to overcome.
The year 2022 was yet another recordbreaking year. By mid-October, 385 startups raised 28.5 percent more than was raised in the entirety of 2022. Venture capital deals on the continent reached $3.5 billion in the six months through June, more than double the amount in the same period in 2021, according to a new report by the African Private Equity and Venture Capital Association (AVCA). The funds were raised by 300 companies, with 27% of the companies led by female founders or having at least one female founder. The increase in investment is primarily driven by start-ups raising more significant amounts to expand on the continent, either organically or through acquisitions. Private capital investors achieved 22 full exits between January and June 2022, a 29% increase compared to a 37% decline in exits globally.
Gearing up to its annual ecosystem report, Disrupt Africa gave a glimpse into some interesting details. Nigeria is leading the way in terms of deals made, with 123 companies that raised a combined $858 million between January and September. Egypt comes in second with $621 million, and Kenya is third with $489 million.
South Africa continues to have a relatively disappointing year compared to other members of the "big four,” with $297 million raised by 44 companies. Looking at specific sectors, fintech continues to reign supreme, with 137 fintech start-ups having raised a total of $1.27 billion so far, already more than the $1 billion banked in 2021.
The health sector continues to gain momentum, with about 10 percent of overall investment. Looking at some of our work at Angaza Capital, Viebeg Medical gained a follow-on investment, accelerating their work of digitizing healthcare supply chains in Rwanda and the region. Helium Health continued the vital work of digitizing hospitals and clinics across African countries. Moving on to logistics and mobility, the sector is gradually set to overtake the fintech sector in the start-up ecosystem, according to Tekedia, as it raised 11.4% of the funds, making it the second-highest sector. During 2022, we continued working alongside MAX to facilitate their expansion into East Africa, invigorating the region’s transition to clean mobility.
Education, raising 6.6% of funds, with over 200 Edtech start-ups spread across the African continent, is another crucial sector that gained more traction after COVID hit. Hundreds of millions of children were left for home-schooling but without the needed infrastructure to continue their education. Per UNICEF, at least half of Sub-Saharan Africa’s schoolchildren do not have internet access. Without the internet, TV becomes a viable medium for learning away from school. Akili Network addresses the challenge by creating engaging educational content for children and their parents. Akili Kids!, Akili Network’s TV, is one of the largest children’s channels, and Angaza Capital’s latest investment will allow it to scale its educational impact across Africa.
Moving on to insurance, according to McKinsey, only 3% of Africa is insured - by far the lowest coverage in the world. Excluding South Africa, Africa’s most insured market, this number drops to a staggering 1.12%, and $1 in every $4 dollar is lost due to unnecessary claims processes and delays. Eden Care is working to modernize claims management processes and increase insurance penetration by automating the client journey end-to-end and introducing insurance products that cater to the unique situation of Africa as a mostly low-income continent with a vast informal sector.
With another record-breaking year under its belt, Africa’s innovation ecosystem is set for an exciting 2023, where real problems will be tackled, and lives will be changed for the better.
The writer is an investor in Ignite Power, a leading solar firm in Rwanda.
The views expressed in this article are of the author.