East Africa’s investments in startups declined by more than 50% in 2021, with deal activities falling by 2%, largely due to the impact of new restrictions imposed by governments to tame the spread of the third wave of the Covid-19 pandemic.
The latest Venture Capital in Africa report (April 2022) by the African Private Equity and Venture Capital Association (AVCA) shows that the value of funding raised by East African entrepreneurs as a proportion of total deal value in Africa fell by more than half to 7% ($364mln) in 2021 from 18% ($900mln) in the seven-year period (2014-2020).
However, in the continent, the total amount raised by African startups more than quadrupled to $5.2bln from $1.1bln in 2020 helped by a surge in venture capital (VC) deal activities in Nigeria.
The amount was raised from 604 unique companies, raising the average annual total deal value to $1.3bln between 2014 and 2021 from $700mln between 2014–2020.
According to the report, African startups raised a total of $5bln for the seven-year period to 2020.
Overall, the financial sector accounted for the largest share of VC deals by both volume and value in the continent followed by information technology and consumer discretionary. “This increased proportion is due to the overwhelming influx of activity in, and capital allocated to, the financials sector in 2021 specifically, which drew a monumental 60% of the total deal value for the year,” the report says.
Nigeria played host to 23% of the total early-stage investment deals in Africa in 2021 followed by South Africa (17%) and Egypt (15%), with Uganda coming in ninth with 2%.
Kenya’s VC funding was adversely impacted, attracting only 13% of total deal volume in Africa and just 4% of total deal value, with the declining performance compounded by increasing competition in the East Africa region from neighbouring countries such as Rwanda and Uganda.
According to the report, 87 deals took place in Kenya in 2021, with a total reported value of $225mln.
Big deals that took place in Kenya in 2021 include the $50mln Series C round in e-commerce food distribution platform Twiga Foods from a consortium of investors including TLCom capital, the $40mln investment in Victory Farms, as well as British International Investment’s $10mln investment in asset financing platform M-Kopa.
Despite the poor performance of Kenya’s VC funding, the report notes that the country’s startup ecosystem remains robust, with over 200 new businesses being registered daily up from 30 business registrations […]