Maxime Bayen, venture builder at Catalyst Fund and co-founder of The Big Deal, believes that another big reason startups in Africa have continued to raise money amid the global slowdown is that they solve for primary needs. While consumers in Europe or the US looking to reduce their expenses in response to the economic crunch may, for example, axe a fast-delivery service or an investment app, a mobile banking or edtech service is less likely to be dropped.

“Startups raising funding in Africa have two common characteristics, and one is that they’re solving big problems like access to banking and energy,” he tells Quartz.

Fintech, in particular, continues to dominate venture funding for African startups. It represented 54% of all venture funding on the continent in 2021 and is responsible for the biggest deals in 2022 so far such as Flutterwave’s $250 million Series D raise at a $3 billion valuation.

Another key factor Bayen suggests has contributed to the resilience of the African ecosystem in the face of the global downturn is the fact that many of the startups raising funds have strong traction in terms of revenue.

Will Africa’s VC funding boom last?

Historically, the second half of the year has seen more venture funding flow to African startups compared to the first half. The second half of 2021 in Africa saw venture funding deals worth $3 billion compared to $1.19 billion in the first.

There’s every possibility that the growth witnessed in early 2022 could carry on into the second half of the year, but it’s still too early to say for sure.

The $4 billion total raised in 2021 was almost three times what was raised in 2020 and 2019, when venture funding for African startups was pegged at $1.7 billion and $1.3 billion respectively.

Emerging trends offer a glimpse into what the future could look like. For instance, while fintech remains the biggest draw for investors, an influx of startups offering similar financial services and vying for the same pool of customers has investors offering more scrutiny and stepping up their due diligence efforts. This is a trend Rest of World explores.

More attention is also being paid by investors to startups operating in other sectors such as logistics, blockchain, education, and green energy. Blockchain startups in Africa, for instance, raised $91 million in the first quarter of 2022, representing eleven times growth compared to the first quarter of  2021 according to a report by blockchain investment firm Crypto Valley Venture Capital (CV VC) and Standard Bank.

What is almost certain is that African startups’ share of global venture funding will continue to rise.

“It should increase (from the current 1%). It’s been increasing. Fundraising in Africa is growing,” Bayen says.

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