Across the African continent, 2021 was a good year for startups as funding hit a record high at about $5 billion. While this heralded the promise of great things to come, it was just a tip of the iceberg when you compare it to average global funding.
According to Crunchbase, globally, startups in tech and related fields raised a total of $643 billion in 2021. This accounts for a 92% growth from 2020 when the total amount raised was $335 billion.
The $5.2 billion in 2021 raised by African startups represents just 0.8% of all venture dollars. Although it’s much better than any other year prior, it still signifies that the continent has a long way to go.
In comparison, startups in Latin America received $14 billion of investor funding while those in Southeast Asia raised $25.7 billion in funding.
Africa is still in its early stages of acknowledging the importance of backing up startups. In comparison, the aforementioned ecosystems are more developed and mature intertwined. Their infrastructure policies and the economies they operate in are way ahead of Africa in several fronts.
Across the world, the investment cycle records highs and lows along the way and it’s being witnessed in Africa. According to TechCabal, despite the seemingly robust investments coming into the continent. “It was already clear by June at least that fewer deals were being completed compared to last year.” The publication notes.
There were also increased merger and acquisition activities, signalling a change in the way the ecosystem operates.
“Layoffs were another sign. And without the PR garb of new venture funding rounds to provide cover, internal governance issues began to show up in the media and flawed business models” Writes TechCabal.
Ultimately, all these are signs of a healthy startup ecosystem that can perform better if and when supported by the right policies and intentions.