West Africa Q1 2022 funding report

Published 11 April 2023
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In this report, we break down the funding in West Africa in Q1 2022, how has Africa’s most populated region fared over the first 2 months of 2022 in terms of VC-backing ad investment going towards local technology start-ups?

In April 2022, Microsoft announced plans to support 10,000 African start-ups over the next five years through partnerships with accelerator and incubator programmes, as well as VCs to potentially provide over $500 million in funding.

This is not the only giant name from Silicon Valley to invest in African technology companies. Last year, Google launched a $50 million USD fund to support early- and growth-stage start-ups in Africa.

Figure 1: Total investment into African technology companies

The interest of investors like Google and Microsoft, alongside many others, has significantly grown the amount of funding going towards African start-ups with 2021 reaching a record high of $4.2 billion USD raised over 494 funding rounds (excluding grants, prizes and non-equity assistance).

It is exciting to see African technology companies in the headlines, with more companies growing their valuation and record-breaking funding going towards tech start-ups across Africa. But have the rest of West Africa’s technology companies started 2021 in such a positive way, we look at the Q1 2022 funding trends in more detail.

A positive start to 2022 in West Africa

West Africa has long attracted the most funding of all the African regions, and Q1 2022 is no exception. Last year, West African technology companies raised $1.78 billion USD across 60 deals. This was a massive increase in the amount raised in both 2020 and 2019 (totalling $1.08 billion USD across 163 and 135 deals respectively).

Figure 2: Total investment into West African technology companies

In total, West African start-ups have raised $588 million USD across 37 funding rounds in Q1 2022. This is a marginal increase from Q4 2022, in which West Africa start-ups secured $405.2 million USD across 46 funding rounds.

Unsurprisingly, Nigerian start-ups lead the count in terms of funding rounds in Q1 2022 with 29 of the 34 start-ups securing funding in this quarter being Nigeria-based. You can compare this with the Q1 report for 2021 here.

Figure 3: Quarterly funding to West African technology companies since 2018

However, excluding the $250 million USD Series D secured by Flutterwave, the total closed across the remaining funding rounds totalled $331.4 million USD (across 32 funding rounds), which is slightly lower than the previous quarter.

Companies securing early-stage funding at the pre-seed or seed stages have had a promising start to the year. In 2021, cumulative funding secured by West African technology companies at the Pre-seed or Seed stage equalled $127.7 million across 104 funding rounds. In 2020 this figure was significantly lower with $39 million USD raised over 120 funding rounds. To date, West Africa technology companies have secured a total of $65.8 million USD across 26 pre-seed or seed-stage funding rounds in Q1 2022.

Figure 4: Annual investment into pre-seed or seed-stage companies across West Africa

West Africa FinTech still attractive

FinTech deals in West Africa continue to attract investor attention. In 2020 FinTech deals accounted for 22% of all funding rounds across the whole of Africa. In West Africa, FinTech accounted for 31% of deals. In 2021, the proportion of FinTech deals dropped to 22% of funding across the whole of Africa, while in West Africa the proportion of FinTech deals increased to 36%. In Q1 2022, the proportion of FinTech funding has spiked to 42% in West Africa, in comparison to 28% of deals across the whole of Africa.

Figure 5: Proportion of funding rounds by sector in West Africa from 2020 to 2022

While the HealthTech sector dipped by 6% in the proportion of funding rounds secured between 2020 and 2021, the logistics sector grew by 4% between 2020 and 2021. The proportion of funding rounds secured by HealthTech companies in the West Africa region has continued to decline from 7% of funding rounds in 2021 to 3% in 2020. West Africa’s transport and logistics is holding steady at 19% over this period.

West Africa start-ups secure larger early-stage funding rounds?

While the total number of West Africa deals and the amount invested has increased, we have also seen a corresponding change in the size of ticket favoured by investors. The proportion of funding rounds totalling $500k USD or less has decreased year on year since 2018. In 2018 it represented 55% of total deals, whereas only 5% of deals in 2022 so far total $500k or less. The proportion of deals totalling $500k to $5million USD has increased from 18% of total deals in 2018 to 50% of total deals.

Figure 6: Proportion of funding rounds closed by West African technology companies by disclosed ticket size since 2015

A new generation of West African technology companies

West African technology start-ups have had a positive start to the year both in terms of funding and the number of deals closed. Funding levels have bounced back and exceeded pre-Covid numbers. Could the increasing number of larger size deals perhaps be an indication of a maturing ecosystem featuring a large frequency of later-stage funding rounds?

Figure 7: Value of pre-seed and seed-stage deals closed by African technology companies by region

As West Africa continues to dominate the world of VC-backing in Africa, the increasing number of pre-seed or seed-stage funding rounds going towards Egypt suggests that the North African region is hot on West Africa’s tail. Last year, North African technology companies secured $220.2 million USD compared to $127.7 million USD closed by West African technology companies.

Stay tuned for our upcoming report on North Africa’s burgeoning technology landscape.