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Where did VC investment grow the fastest in 2021? 

Jeff Bezos gesticulating a point with outstretched arms during a speech
Reuters/Rex Curry
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More than 600 tech companies with the majority of their operations and users in Africa raised $5.2 billion from venture capitalists in 2021, according to a report from Partech, a VC firm that tracks annual data.

The record sum is three times that of 2020 and was partly driven by renewed interest in growth stage funding for startups like Flutterwave, Yoco, Wave, and Andela. Where 2020 is remembered for one landmark acquisition amidst a pandemic that some feared would dampen Silicon Valley-type risk-taking in Africa, the likes of Softbank, Tiger Global, and Sequoia Heritage (a Sequoia Capital subsidiary) saw 2021 as the time to normalize megadeals in Africa by making bets that minted unicorns.

It was a record year for venture capital everywhere

As the world reopened more fully in most countries in 2021, businesses regained confidence to expand on their ambitions. It helped drive VC investment in companies to record levels in the US, Europe, Asia, Africa, and Latin America.

Exact comparison of investment between regions is not very straightforward, as different metrics are used by data sources to collate these figures.

For example, Partech’s VC investment data for Africa considered African companies that raised above $200,000 in each round. And there are still unresolved questions about what counts as an African company; basing its definition on where a company has most users and makes most of its revenue, Partech included the $250 million raised by Zipline, the US drone delivery startup that operates in Rwanda, Ghana, and Nigeria.

That said, Africa still had a very good fundraising year. Even with Zipline (and other companies like Tala, and Zepz) removed from the 2021 data, VC investment growth in Africa last year would amount to 215% which is more than the figure for any other region.

Growth-stage deals had the lion’s share in Africa

More than half of the 681 deals Partech recorded were for investments between $200,000 and $5 million. This funding category is often for seed stage startups that are more or less figuring out their product roadmap. Investment into startups at this stage was a little over $600 million in total.

But last year really belonged to scale-up companies. There were 21 deals over $50 million with a combined value of nearly $3 billion.

Strong year-on-year growth at every check size underlines the perception in Africa that more investors are keen to get into the startup arena whether at early or growth stages.

That sentiment has gained more momentum this year with some US-based firms making their first investments into African startups. In January, Andreessen Horowitz invested in South African gaming platform Carry1st. This month, General Atlantic led a $40 million round in Nigerian health insurance company Reliance Health.

2019 beat 2021 on one benchmark

Africa has more VC-backed startups today than ever before with big investors—from Jeff Bezos to Serena Williams—having at least one African startup in their portfolio. But the size of the average investment deal in 2021 was only higher than 2018’s figure, despite the unprecedented flood of $100 million checks.

It calls attention to the need for more investment across different stages of the startup spectrum, and in sectors outside of fintech which, like previous years, received the most investor dollars (63% of the $5.2 billion) despite accounting for only a third of the deal volume in 2021.

Last year’s funding blitz stirred chatter about a possible bubble. “Some Nigerian investors worry that the excitement is overdone,” The Economist declared in July, sparking rebuttals and counter-rebuttals.

Fears of a bubble are veiled questions about the value being created by the funded startups. And those questions should be asked, exploring “the actual returns for investors and founders, the impact on local economies,” as the Partech report notes. More so as 2022 could be another record year seeing as Tiger Global, the US firm known for its aggressive pace, has already closed three deals in the first six weeks.

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