African start-ups enjoyed a bumper year in 2021, but still lag the fund-raising capacity of their global emerging markets peers. We expect another strong year, given attractive relative valuations, and as investors gain a better understanding of the region's opportunities and risks. Fintechs should continue to feature strongly, given the continent's huge underbanked population.
A strong year for African start-ups
Based on thebigdeal data, which tracks US$100k+ deals, there were 818 funding transactions in Africa in 2021, raising a combined US$4.3bn. Both numbers are well-up on prior years.
By geography, over 80% of funding was raised by start-ups in Nigeria, South Africa, Kenya and Egypt. 30 countries recorded at least one $100k+ transaction in the year.
In terms of transaction size, there were 12 mega deals (US$100mn+) that raised a combined US$1.9bn (ie 44% of the total), plus a further 110 deals exceeding US$1mn, leaving around 700 transactions in the US$0.1mn-1mn bracket.
Fintechs garnered the most interest
Fintech was the largest recipient sector, with 53% of the total. The sector dominated the top transactions of the year (see Appendix). And Nigerian fintechs alone captured a fifth of the continent's funding, which attests to the massive financial inclusion opportunity in that country.
The continent still lags in an emerging markets context
While the growth numbers are impressive, it is worth bearing in mind that African start-ups' fund-raising capacity still lags most other emerging markets (note that the Senegal data presented below was boosted by a single transaction, Wave). Barring a broader market downturn, we think it is likely that the 2021 numbers will get beaten this year; valuations in Africa remain attractive, and more VC investors are looking seriously at the continent than ever before (over 800 investors committed to at least one deal during the year).
2021 saw some new African unicorns emerge
2021 had a bumper crop of unicorns, their number almost doubled and now exceeds over 1,000 globally. But Africa is still very much under-represented, although its population rose from 1 to 6 during the year. We have previously written on OPay, Chipper Cash and Flutterwave.