The Big Four: While Startups In Kenya And Egypt Have Already Surpassed The Funding They Received Last Year, Nigeria And South Africa Are Struggling to Keep Up With Last Year’s Performance

This year has been quite a rollercoaster ride for startups across the world. In the face of macroeconomic challenges such as inflation and the possibility of a recession, investors have tightened their grips on the funding they provide these startups. While some startups have been able to meet up with their performances from the previous year, others are struggling.

In this article, we will be focusing the spotlight on Africa’s Big Four  –  Nigeria, South Africa, Kenya, and Egypt  –  and how they are performing this year, in comparison to last year. But first, let’s do a quick recap of some of the notable achievements that startups existing in the Big Four, and Africa as a whole has achieved. 

In a September report, we noted that more than 100 African startups have raised their first 100 million so far this year (as of the time the article was published). Notably, out of these 100 startups that had raised their first $1 million (or more) round, 84 percent of them were from the Big Four – Egypt, Nigeria, Kenya, and South Africa. 29 Egyptian startups, 28 Nigerian startups, 17 Kenyan startups, and 9 South African startups made the list. Cumulatively, the Big Four had 83 startups that had raised their first $1 million (or more) round. The remaining startups came from 8 African countries which can claim at least one such deal.

We also noted the shift that had occurred. In 2019 and 2020, seed and Series A rounds saw investments of at least $1 million, but since 2021, the share of pre-seed and seed rounds worth $1 million now surpasses 80 percent.

In another report we published last month, we discussed how Africa remained the strongest-performing region across the globe even as the continent/region’s quarter-on-quarter and year-on-year decline in funding were on par with global trends.

This decline in funding started towards the end of 2022, and “Africa is the only continent to still show positive YoY growth if we compare Q1-Q3 2022 TO Q1-Q3 2021: +27 percent YoY,” a report by Africa: The Big Deal noted. “All other regions are showing year-on-year decline ranging from -13 percent YoY in Europe to -26 percent YoY in the US, -33 percent YoY in Asia and even -61 percent YoY in LatAm,” the report also noted.

This report also took to another yardstick for measurement. “…Another interesting way to look at the numbers is to compare how much startups have raised this year so far (Q1-Q3 2022) with what they had raised in 2021 as a whole, as it gives a good indication of how likely regions are to eventually match – or exceed – last year’s performance. Once again, Africa is an outlier. With just over $4bn at the end of Q3 2022, startups in Africa had already secured 87 percent of the total money they raised in 2021, which means they could still be on track to set a new record in 2022. Comparatively, at a global level, the amount raised in the first three quarters of the year (2022) only represents 52 percent of what was raised in the whole of 2021. In LatAm, this number is as low as 31 percent.”

According to a new Africa: The Big Deal report, while startups in Kenya and Egypt have raised more funding than they did in 2021, Nigeria and South Africa –  the last two of the Big Four – are struggling to keep up with their performances from last year. 

“At the end of September, startups on the continent had raised 127 percent of the amount raised in the period in 2021, and 87 percent of the total amount raised in 2021 as a whole. At the end of October, these numbers stood at 126 percent (vs. Jan-Oct 2021) and 92 percent (vs. in full). But when we updated these numbers, we also realized that continent-level stats are hiding big discrepancies in performance amongst the Big Four,” Africa: The Big Deal noted. 

The report noted that Kenya surpassed what it had in 2021 in terms of the number of deals worth $100,000. So far this year, the country has had 123 deals worth $100,000, compared with 117 from last year. Kenya is, however, yet to reach the total number of deals attained in 2021; a total of 142 deals. “…Startups in Kenya have already raised 2.3 times the amount they have raised in 2021 as a whole ($931 million vs. $413 million),” the report noted. Although Egypt follows the same trend as Kenya, it has way fewer differences in comparison with last year. The country has had 125 deals worth $100,000 this year, surpassing last year’s 112 deals. Egyptian startups have raised 1.3 times the amount they raised in 2021; $772 million so far this year, compared with last year’s $602 million.

Let’s go over the last two of Africa’s Big Four. We’ll begin with Nigeria. As of October’s end, Nigeria has had more deals worth $100,000 than in the full year of 2021, which is impressive. “But given the incredible track record of Nigerian startups last year ($1.7bn+ raised), and the lower number of ‘mega deals’ in 2022 in particular, in terms of amount, Nigeria is currently tracking below the same period last year (80 percent; $1.16 bn vs, $1.45 bn),” Africa: The Big Deal noted in its latest report. Additionally, Nigerian startups have raised about two-thirds of the amount they raised in the full year of 2021. 

And now, over to South Africa, where the report says all her indicators are in red. South Africa is the only country with both fewer deals announced and less funding raised, compared to 2021. The country has only raised 43 percent of what it did last year. 

“While the ‘Rest of Africa’ cannot be treated as a homogenous group, and columns per country are too low to identify meaningful individual trends, it is worth noting that overall outside the Big Four, both the number of deals and the total amount raised are on the rise compared to 2021,” the report concluded.

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