The year 2022 was challenging for the global tech sector, with plummeting shares and massive layoffs affecting tens of thousands of people. Looking at the numbers, tech stocks fell more than 30% in 2022, more than the overall market drop of 20%.

Coming off a fantastic 2021, tech startups hoped to maintain their record-shattering momentum. In the first months of 2023, startup funding has slowed to a relative crawl. In 2022, global venture funding totaled $445 billion, according to Crunchbase, a 35% year-over-year decline from the $681 billion startups raised in 2021. The alarming number represents a steeper pullback than the one experienced after the 2008 financial crisis. As always, and as in every other sector, Africa tells a different story than the ones described on western news and tech sites.

Africa’s tech scene continues to bloom

Disrupt Africa published their 7th annual African Tech Startup Funding Report a few days ago, giving us the perfect timing to summarize a record-breaking 2022 that has outperformed the global scene.

A total of 633 African tech startups raised a combined $3,333,071,000 throughout 2022, a record in both respects and a funding total that passes the $3 billion mark for the first time. The number of funded startups increased by 12.2 percent to 564 companies in 2021, while the total secured funding jumped a whopping 55.1 percent.

An interesting story unfolds when we focus on geographical boundaries. While the "Big Four” (Nigeria, Kenya, South Africa, and Egypt) continued to dominate, their share began to decline. Nigeria was again the best-funded country, with 180 startups (28.4 percent of funded ventures) raising a combined $976,146,000 (29.3 percent of the continent’s total) - substantially ahead of all other countries on both counts. Some minor signs of slightly more evenly distributed funding arose; During 2021, 80.1 percent of funding came from the big 4, and that number declined to 75.8 percent in 2022, and the proportion of total funding raised by these also decreased to 80.8 percent of the annual total, down from 92.1 percent in 2021. This is a significant development considering until 2022, the share secured by the major markets had only been rising. This shows considerable progress in other countries across the continent as innovation and technology continue to gain momentum and the interest of young entrepreneurs and local governments.

Uganda had a stellar year, with 15 startups raising $69,314,000, up 964.3 (!!!) percent from 2021. Tanzania grew its number of funded startups from one to eight, and funding shot up to $42,917,000. Senegal had 9 startups that raised funds, and total funding grew 135 percent from 2021 to hit $7,983,000.

Fintech still reigns supreme

In a continent where 57% of the growing population is still unbanked, and 40% prefer to use digital services for their financial needs, it is no surprise that fintech is on the mind of local entrepreneurs. As we’ve seen in recent years, fintech continued its dominant streak, with solid growth in both the number of backed startups and the total amount of funding secured. 205 fintechs received backing, amounting to 32.4 percent of funded startups, raising a whopping $1,446,794,000 - 43.4 percent of Africa’s total. According to Mckinsey, cash is still used in around 90 percent of transactions in Africa, which means that fintech revenues have enormous potential to grow. If the sector overall can reach similar levels of penetration to those seen in Kenya, a country with one of the highest levels of fintech penetration in the world, the firm estimates that African fintech revenues could reach eight times their current value by 2025. In a pleasing turn of events, the proportion of overall funding was down slightly, from 48.3 percent of the continent’s total in 2021 to 43.4 percent in 2022, showing a positive trend of other sectors that are starting to attract more significant amounts of funding.

E-commerce and retail tech came second in terms of backed startups and total funding. Seventy-four (74) startups raised a combined $556,761,000 - contributing 16.7 percent of the continent’s total and representing growth of 70.7 percent from 2021. The average round size in 2022 came to $7,523,797, up from $3,089,514 in 2021 and up from $1,596,091 in 2020 - reflecting the increasing number of larger and later-stage rounds.

Energy came sixth for the number of funded startups and fifth for total funding in another year of growth. A total of 24 startups (3.8 percent of the African total) with businesses ranging from energy storage and battery recycling to cooling, health, agriculture, and e-mobility, secured investment, up 9.1 percent on 22 startups (3.9%) in 2021. Those 24 startups raised a combined $150,708,000 (4.5%), an overall total that was up 44.7 percent from 2021. With more than 660 million people still living without electricity access and with a growing population that is expected to more than double by 2050, becoming 25% of the total global population, energy solutions and renewable solutions specifically are entering the continent and providing solutions to millions.

One issue that continues to plague the ecosystem is gender equality. 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 percent. According to Project Syndicate, in sub-Saharan Africa, the overall female labor-force participation rate has reached 61%, yet women constitute only 30% of professionals in the tech industry. There are multiple initiatives to close the gender gap, including African girls Can Code, but the problem must be addressed from the ground up. Availability of basic infrastructure like electricity and internet access could be the first building blocks and are already enabling women and girls to get a better education and spend less time on daily household chores.

Since Disrupt Africa began publishing its annual funding report, the number of startups to secure funding has continuously increased each year, growing by 406 percent since 2015. The average deal size has also risen dramatically, and in the fintech space, it came to more than $7m, a giant leap from $5.6m in 2021. African tech is here to solve major issues, often making it and its founders more essential than nice-to-have tech products. The trend is expected to continue upward, and intelligent investors could benefit.

The writer is an entrepreneur and investor, leading sustainability-driven companies in Africa and the Middle East