African climate startups set to gain ground as VC funding shifts their way

Venture capital activity around climate tech has been heating up in Africa despite the global VC funding cooldown.

The continent’s climate tech startups secured over $860 million in equity funding, largely driven by clean energy technologies, representing 3.5x growth amid macroeconomic headwinds last year, data shows, making climate Africa’s most funded sector after fintech.

This seems to be just the beginning: The past few months have seen a slew of new funds dedicated to investing in the space, indicating that funding for climate tech startups will persist for a while.

Pan-African venture firm Novastar was last week reported to be raising over $200 million for its third fund, Africa People + Planet Fund, which will invest in startups developing agriculture and climate solutions on the continent. Around the same time, climate tech venture capital firm Equator announced the initial close of its fund to back seed and Series A startups in the energy, agriculture and mobility sectors. Catalyst Fund’s new climate-focused $30 million kitty has also hit the ground running and is now investing in its first cohort of startups.

Satgana, a new climate tech firm launched late last year, plans to allocate up to 40% of its funds in “planet-positive” startups in Africa. Other African climate-focused investment vehicles that have raised capital recently include the $250 million AfricaGoGreen Fund (AAGF), which closed the second tranche of its fundraise in February, and the Energy Entrepreneurs Growth Fund (EEGF), which raised over $110 million last year.

The AAGF finances “climate-friendly” projects and counts pay-as-you-go solar providers BBOXX and Solarise as part of its portfolio. Similarly, the Shell-backed EEGF fund invests in startups that increase access to clean and reliable energy to households and businesses on the continent. Oxfam Novib and Goodwell have also launched a new fund to provide venture debt to startups in this space.

The rise of so many new funds shows that even amid the capital crunch, there will be some dedicated pools for founders building startups that can lead energy transition efforts and offer solutions to mitigate the effects of climate change. The timing of the funding couldn’t be better.

African climate startups set to gain ground as VC funding shifts their way by Annie Njanja originally published on TechCrunch

After a record 2022, 8 investors explain why it’s ‘still just Day 1’ for Africa’s startup ecosystem

Last year was a good 12 months of firsts for African tech startups.

For the first time, the sector attracted over 1,100 unique investors in 2022, which in turn resulted in a record fundraising haul of $6.5 billion, according to data from Partech.

In fact, even some of the excesses of 2021 were eclipsed when the number of investments on the continent rose higher in 2022 than they had a year earlier, boosted by early-stage firms flocking to fund startups in the wake of landmark exits of homegrown companies like Jumia and Paystack.

What drove such volumes when the rest of the world was reining back the collective enthusiasm of 2021? To find out, we polled a few investors who had the highest volume of deals in Africa last year.

It turns out that while later-stage investors, mostly international VC firms, grabbed headlines by writing immense checks, pre-seed and seed-stage investors were instrumental to the growth of the continent’s tech ecosystem.

In Africa, incubators, accelerators, angels and seed investors easily outnumber larger funds — simply because it’s much harder to raise a large fund here. They accounted for more than 70% of the 1,100+ investors that participated in at least one deal on the continent last year.

“This shows that Africa’s investment landscape is still very promising because it continues to grow, and there’s increasing interest in multiple startup ecosystems, including nascent ecosystems. There’s also been an increase in syndicates and investment groups consisting of Africans at home and in the diaspora, as well as an increase in the number of founders of later-stage companies who are now investing in other founders,” said Kola Aina, general partner at Ventures Platform.

“These are all indications of a growing ecosystem,” he added.

However, the investor community also recognizes that there’s still a long way to go and a slew of opportunities left to tap.

“We are slowly building a more durable capital base for African tech. Having 1,000 active investors is not enough,” said Stephen Deng, founder and partner of DFS Lab. “We need thousands of active investors that support the different startup stages, especially on the growth side, offering both equity and debt.”

That said, Africa didn’t go unscathed — several investors noted that they did see deal flow and cadence slow down in 2022 and expect investors to be more careful about who they invest in and at what point.

“We definitely noticed deals were happening slower,” said Karima El Hakim, country director of Plug and Play Egypt.

“A round that would’ve closed in one or two months in 2021 took three or four months in 2022 [ … ] We have definitely seen valuations tighten, and a lot of startups have pivoted into less cash-intensive business models.”

Read on to find out what these prolific investors have to say about hot startup sectors in Africa, investment trends, their predictions for 2023, how to pitch them and more.

We spoke with:


Kola Aina, general partner, Ventures Platform

Your firm was among the African investors that wrote the most checks to startups in the seed stage last year. How do you balance writing so many checks and funding the best companies?

We go back to first principles, starting with the core of our thesis. We also have a very wide top funnel such that in 2022, we made initial contact with over 2,500 startups and ideas, and eventually only partnered with less than 1% of that top of the funnel. We also get strong referrals from our community of founders, which improves our signal-to-noise ratio.

There’s a pretty strict house process, regardless of how many deals we do. Over time we’ve continuously optimized that process to ensure we are efficient in how we review deals and how soon we can give founders feedback.

Firms that back a lot of startups are often criticized for not doing their due diligence and labeled lazy for using “spray and pray” tactics. How does this affect the investment landscape? Has this led to unrealistic valuations?

Markets are cyclical — founders and investors adapt to prevailing market conditions. Today, the market dictates a slower and more deliberate pace in the face of global economic uncertainty. This is a development we welcome, as it means that our penchant for due diligence and rigor is now back in vogue. The investment landscape remains unchanged even if things are a little slower; startups with strong fundamentals and good traction will attract capital and do well.

The most active African investors were involved in 15-20 deals, according to a report on African VC activity in 2022. How was that volume of deals possible in a year when investors retreated heavily? Will we see similar numbers in 2023, or will things change?

Despite the gloomy macroeconomic conditions, many investors still believe in what is possible in Africa. We expect to make more investments this year within the context of a few market trends, such as lower valuations, more emphasis on profitability and capital efficiency, more cost reduction initiatives, and opportunities for corporate buyers with strong balance sheets to acquire startups.

“We did see some unrealistic valuations in 2021 — it was almost as if founders forgot how to build with, say, $200,000. I stayed away from such deals.” Olumide Soyombo, co-founder, Voltron Capital

What differences did you notice in the investment landscape in 2022 compared to 2021? Were deals less or more competitive?

For global venture capital, 2021 was an outlier. But last year was when things started to cool down, starting with public markets and then manifesting at the late-stage startup cycle.

The challenging market conditions impacted fundraising — we noticed that, in comparison to 2021, some rounds took longer to close, some founders had to raise less than they initially planned, and at more conservative valuations. Sadly, some investors pulled out of deals.

We also noticed an increase in debt funding, which doubled from 2021 to $1.5 billion, which we believe is an indication of the maturity of the ecosystem and the growing/diverse financial needs of entrepreneurs.

Did your investment strategies change along with the current market conditions?

Not really; if anything, we feel the market geared down to where we were: favoring diligence and rigor over speed.

The African tech market in 2022, for the first time, had over 1,100 active investors and saw more deals signed compared to 2021. What does this say about the current state of Africa’s investment landscape?

This shows that Africa’s investment landscape is still very promising because it continues to grow, and there’s increasing interest in multiple startup ecosystems (including nascent ecosystems).

There’s also been an increase in syndicates and investment groups consisting of Africans at home and in the diaspora, as well as an increase in the number of founders of later-stage companies who are now investing in other founders.

These are all indications of a growing ecosystem.

Looking forward, which sectors will you continue to keep an eye on, and which trends do you expect to take off? Why?

We have seven key areas of interest that we remain committed to: financial services and insurance, life science and health tech, edtech and digital talent accelerators, enterprise SaaS, digital infrastructure, agtech, and food security.

That said, we follow innovations closely and are open to exploring new verticals. Currently, we’re excited about AI and climate technologies, because they offer an unprecedented opportunity to create a better, more sustainable future for all while ensuring Africa is not left behind.

How do you prefer to receive pitches? What’s the most important thing a founder should know before they get on a call with you?

Warm introductions are very nice, but not always accessible to every founder; this is why we have a channel for receiving decks through the application link on our website.

The investment team reviews decks and arranges meetings with founders building companies that align with our thesis.

Our thesis is the most important thing founders should be aware of because that’s our initial criteria for screening. We are an early-stage fund that invests in market-creating innovations solving for non-consumption in Africa.

In 2023, we’re looking to invest in more companies in Francophone West Africa, and East and North Africa. We are also looking forward to backing more female-led companies, and we are usually very excited to invest in pre-seed companies.

Zachariah George, managing partner, Launch Africa Ventures

Your firm was among the African investors that wrote the most checks to startups in the seed stage last year. How do you balance writing so many checks and funding the best companies?

We have strong relationships with most of the continent’s leading incubators, accelerators and venture-building studios. We can cherry-pick the top companies graduating from these programs before their demo days, which is a win-win for both the programs and for us.

Similarly, our solid relationships with Series A and Series B VC funds on the continent (and globally) creates an environment where they refer great companies to us that they really like, but are just a bit too early stage for them.

The most active African investors were involved in 15-20 deals, according to a report on African VC activity in 2022. How was that volume of deals possible in a year when investors retreated heavily? Will we see similar numbers in 2023 or will things change?

Africa accounts for about 17% of the world’s population, around 4% of the world’s GDP, but only about 1% of global venture capital.

This capital funding-economic value-target addressable market arbitrage opportunity is blatant and is constantly being tapped into (and rightly so) by investors who have done their homework.

They understand African technology-driven ventures will continue to grow and scale from:

  • increased consumer purchasing power.
  • higher penetration of smartphones.
  • better digital connectivity through both e-commerce and social-commerce.
  • greater corporate-startup collaboration from a channel distribution and customer acquisition perspective.

I expect to see similar numbers in 2023, and hopefully even better.

What differences did you notice in the investment landscape in 2022 compared to 2021? Were deals less or more competitive? Did your investment strategies change along with the current market conditions?

Last year was definitely a more circumspect and cautious investment landscape compared to the bull-run in African VC in 2021. Deals were a lot more competitive in 2021, because some founders were able to raise at often unrealistic valuations.

After a record 2022, 8 investors explain why it’s ‘still just Day 1’ for Africa’s startup ecosystem by Tage Kene-Okafor originally published on TechCrunch

Africa predicted to experience sustained funding slowdown in 2023

Africa seemed to defy the global venture funding decline in the first half of 2022 after its startups raised $3 billion, double the amount secured over a similar period the previous year. However, the VC market correction caught up with the continent in the back half of last year, when ticket sizes fell and fewer deals closed as investors tightened the purse strings.

VCs now predict that the funding slowdown in Africa will be sustained in 2023 as investors continue to pull back, making it harder for new and existing startups to raise capital.

“My 2023 prediction is that things will get worse before they get better — down rounds, layoffs, closures and bridge rounds will continue to increase in the African startup ecosystem.” Abel Boreto, Novastar Ventures

“With the global economic slowdown trickling into 2023 due to inflationary pressures and tightening monetary policy, investors on the continent will maintain a judicious approach to investment and African startups will continue to find fundraising challenging,” said Bruce Nsereko-Lule, a general partner at Seedstars Africa Ventures.

As a ripple effect, the operating environment for startups is expected to worsen this year, leading to a surge in layoffs, scaling down of activities, down and bridge rounds, and business shutdowns, continuing the trend that picked up at the end of 2022.

Mega-rounds are expected to be scarce, too, as was the case in the last half of 2022, when no deals over $100 million were signed, according to The Big Deal, a database of publicly disclosed deals. Overall, six mega-rounds were closed last year (all in the first six months), half of the number of such deals closed in 2021, when VCs invested record amounts.

Africa predicted to experience sustained funding slowdown in 2023 by Annie Njanja originally published on TechCrunch

Why Africa had no unicorns last year despite record fundraising haul

The African tech scene was met with fanfare in 2021: Venture capital investments in the region totaled between $4 billion and $5 billion and produced five unicorns. In my piece detailing this progress, I predicted there would be more unicorns in 2022. Those predictions proved to be way off the mark by year’s end.

Data from market insights trackers Briter Bridges and The Big Deal reveal that funding raised by African startups exceeded $5 billion (including undisclosed deals) in 2022 — a slight percentage increase from the figures reported in 2021 despite a global pullback in VC funding. And yet, no unicorns popped up throughout the year, compared to five in 2021.

That fact may appear insignificant because, at the end of the day, private valuations don’t pass an actual test till startups go public. However, producing no unicorns despite raising more venture capital suggests it’s perhaps too early to assume African markets are mature enough to consistently pop out private billion-dollar companies like their Global South counterparts: India, Southeast Asia and Latin America.

That said, 2022 was peculiar. The global economic downturn and venture capital crunch ensured that every region produced fewer billion-dollar companies than the previous year. Globally, 216 unicorns were minted in 2022, per Tracxn, compared to 541 in the previous year. In India, 22 companies became unicorns last year, compared to 46 in 2021. While 18 companies in Latin America got their horns in 2021, that figure fell to just eight last year.

Unlike Africa, these regions raised way less venture capital in 2022 than in 2021, so it makes sense that their unicorn numbers dropped. For example, in India, the number of unicorns dropped by more than half as VC activity dropped by 33%. Latin America and Southeast Asia also witnessed a double-digit decline in VC funding last year compared to 2021, though the drop in unicorns indicates more damage.

So what happened in Africa in 2022 that made it so … weird?

Why Africa had no unicorns last year despite record fundraising haul by Tage Kene-Okafor originally published on TechCrunch

Africa’s tech talent accelerators attract students, VC funding as Big Tech comes calling

Tech giants are increasingly looking for tech talent in Africa, where the number of developers reached 716,000 last year, up 3.8% from 2020, according to Google.

In the last six months, Microsoft and Amazon have been on a recruitment drive that came along with enticing offers including relocation to their hubs in the U.S. and Europe, endearing themselves to the small but growing talent pool amid tough competition from other tech giants like Google, as well as startups.

This demand for African developers is expected to continue, buoyed by the effects of the Great Resignation, which led employers to search for new talent elsewhere, and as tech behemoths like Google, Oracle and Visa expand their operations in Africa.

Yet as demand rises, the number of new developers entering the market is disproportionately small, mainly because traditional education institutions in most African countries have been slow to revamp their courses to keep up with job market demands and the fast-evolving world of technology.

On the other hand, the gap between demand and supply has unequivocally steered the launch of new developer schools and propelled the growth of existing ones in recent months, many of which are gaining the attention of global venture capitalists.

Africa’s tech talent accelerators attract students, VC funding as Big Tech comes calling by Annie Njanja originally published on TechCrunch

New rules for digital lenders in Kenya aim to weed out bad actors while bolstering sector growth

Fresh regulations are often met with skepticism from startup founders, but digital lenders in Kenya largely seem to be upbeat about the new Digital Credit Providers law, saying it will bring order to the sector.

The chairman of the Digital Lenders Association of Kenya, Kevin Mutiso, sounded optimistic about the impending new regulatory environment, saying that it had already fostered investor confidence and will bolster growth in the sector.

“The regulations have encouraged investors to come into our market, and I’m already aware of five new big players that have come in because of the new regulatory field. We are looking forward to being regulated and having a fair playing field,” Mutiso told TechCrunch.

Mutiso added that the association’s 16 members — including the market-dominant Tala and Zenka — are awaiting the required licenses to be fully compliant.

The regulations, set to come into effect on September 18, give Kenya’s apex bank, the Central Bank of Kenya, the requisite authority to police digital mobile lenders that have flooded the local market in the last few years.

VCs set sights on African countries beyond the ‘Big Four’

Africa’s tech startup scene has grown significantly over the last decade, with various reports showing a sizable increase in the number of deals, ticket sizes and funding. Last year, startups in the continent raised about $5 billion, double what was raised in 2021 and nine times the amount from five years ago.

However, this growth has been focused on four countries — Nigeria, Kenya, South Africa and Egypt, known as the “Big Four” because they account for more than 70% of venture capital investment into the continent.

But VCs are shifting their attention elsewhere, reaching startups in at least 29 countries last year, up from 26 in 2020. Outside the Big Four, investments ballooned to $1.4 billion, up 382% year on year, according to Partech’s 2021 report.

What could be driving the sudden interest in other African countries?

“Investors are looking for better-priced but quality deals in these markets. Deals in the Big Four have become overpriced and competitive with the entry of foreign investors,” Nairobi-based Novastar Ventures associate investment director Abel Boreto told TechCrunch.

As the global venture capital market slows, Africa charts its own course

Although Africa’s venture capital totals remained afloat in the first quarter, some investors and tech stakeholders think there’s still a good chance the continent will join the rest of the world in a slowdown.

Experts told TechCrunch that most recently announced deals were finalized months before macroeconomic challenges — high-interest rates, war, inflation — hit the global VC landscape. This means there’s a lag in what’s reported as the current state of VC on the African continent. Thus, as startup funding decreases in the U.S. and Europe, the consensus is that the economic downturn will soon start affecting developing markets — Africa, in particular.

“The moment of truth will be the end of the summer,” Max Cuvellier, co-founder of The Big Deal, told TechCrunch. “August [and] September in particular because this is when we saw a boom last year.”


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Last year, African startups received more than $1 billion in funding during those two months. Anything less than that contributes to a year-over-year decrease, Cuvellier noted.

Stephen Deng, co-founder and partner at DFS Lab, added to that, saying that the same investors that have inflated valuations in later-stage U.S. companies are also the same investors marking up African companies.

“I would not understand why, in the African context, this trend would not eventually hit the continent as well and that we’d see a slowdown,” Deng told TechCrunch. “One of the better-case scenarios is that we still see increased funding, but not the same type of percentage growth year on year.”

“If these global funds pull out and do less, it also means more room for participation from local funds into the extensions or their pre-Series A.” Sherpa Ventures co-founder Aaron Fu

Large firms like Tiger Global and SoftBank have already taken a beating in developed markets. Similarly large firms that earmarked a part of their funds into African startups might reduce the pace at which they invest on the continent, local investors told TechCrunch.

Funding data shows the African ecosystem has already seen inflows of around $2.7 billion in the first half of this year. That’s in excess of double what the continent raised by this time last year. In 2021, Africa produced five unicorns while raising $5 billion in total venture capital funding: Flutterwave, Chipper Cash, OPay, Wave, and Andela.

No unicorns have been created so far in H1 2022. It’s true that stakeholders can perhaps overlook this given that four unicorns were announced in H2 2021, but it would be naive to project the same for the rest of the year; we’re in a completely different market.

But some experts say Africa might not witness a massive drop if large Africa-focused firms keep cutting checks.

Why Nigeria leads the way in YC’s participation in Africa

It’s not a coincidence that TechCrunch has covered more African startups in the last year than any period in our history. Many of those companies are Nigerian, and when we look at venture capital data, we can see why. The country had an incredible 2021 as the most active venture capital scene in Africa, collecting more than $1.8 billion, or 34% of the $5 billion raised across the continent, according to Partech, a pan-African VC firm that also tracks investments.

The country has posted steady progress in the last three years as the leading African startup market. In 2019, startups based in Nigeria attracted $747 million, or 37% of Africa’s total VC investment. Those numbers decreased to $307 million, or 21% of the continent’s total, the following year, though 2020 was a venture capital year much impacted by outside forces.

Thanks in part to a global boom in venture capital activity last year, Nigeria became the first African country to singlehandedly cross the billion-dollar mark while also collecting bragging rights as the preferred destination for mega-investors like Tiger Global and SoftBank.

Y Combinator is paying attention

The ample optimism in Nigeria’s tech community and belief that better days are ahead are unsurprising, despite questions around investors’ due diligence and the eyebrow-raising valuations of some of the nation’s startups.

Speaking of valuations, no seed-stage company in the country is better priced than those in the Y Combinator club. Yesterday, the accelerator graduated its first startup batch featuring its newly revamped terms. The new “standard deal” at YC now features more capital, and prices for Y Combinator graduates are reportedly greater than ever. (Keep in mind that only 10% of the current Y Combinator batch had monthly revenue of more than $50,000 when they were accepted into the program.)

Apart from revenue thresholds, the accelerator shared another interesting statistic concerning Nigeria. With 18 startups, it is the first African country to have the third-largest representation when categorized by country. That’s a milestone for Nigeria, yes, but also an indication of how quickly the African startup scene has developed in a short period of time.