Although the share of funding for African startups declined from 48.3% in 2021 to 43.4% in 2022, fintechs raised in 2022 ($1.04 billion) 39.3% more funding. Nigeria was again the most funded country with 180 startups raising a total of US$976,146,000 or 29.3% of the African continent’s total.
The Big 4’s market share declined
According to Disrupt’s 2022 Africa Tech Startup Funding Report, fintech startups were able to secure US$1.45 billion in funding last year. This represents a 39.3% increase in total funding for the sector from the approximately $1.04 billion secured in 2021. Despite this increase in overall fintech funding, the sector’s share of total funding raised by African tech startups remained down from 48.3% seen in 2021 to 43.4% in 2022.
As in 2021, Nigeria was again the most funded country with its 180 startups raising a total of US$976,146,000 or 29.3% of the continent’s total. Both the number of startups funded by the West African country and its share of the continent as a whole surpassed those of Egypt, Kenya, and South Africa.
And while 2022 was a record fundraising year for countries like Ghana and Tunisia, according to the report, the continent’s so-called Big Four – Egypt, Kenya, Nigeria, and South Africa – again accounted for a disproportionate share of funding for fintech startups on the continent. However, the survey data would seem to suggest that startup funding will be more evenly distributed in the future.
“In 2021, 80.1% of funded ventures were from Egypt, Kenya, Nigeria, or South Africa, compared to 75.8% in 2022. Meanwhile, the overall percentage of funds raised from these markets also declined: in 2022, the “Big Four” startups raised 80.8% of their annual total, down from an abundant 92.1% in 2021,” the Disrupt report states.
Debt financing is the least preferred form of financing
With regard to the most popular financing method, the report stated that of the 310 disclosed financing rounds, more than 70% were in the “seed and pre-seed stage.” On the other hand, less than 5% of all startups disclosed Series B or higher funding.
On the other hand, debt financing was the least preferred financing method, with only 33 startups from a total of 633 “revealing a debt component as part of their round,” according to the survey results. While this total is slightly higher than the 26 seen in 2021, such a paltry figure could mean that firms remain “much more likely to raise equity capital” than debt capital, according to the report.
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Image Credit:: Shutterstock, Pi