Record-breaking private capital deals were made in Africa last year.
In 2021, Investors pumped in $7.4 billion—118% more than the $3.4 billion invested in 2020. The report by the African Private Equity and Venture Capital Association (AVCA) attributes this remarkable increase to “the accumulation of unspent capital pre-covid-19 pandemic, coupled with the covid-19 deal activity hiatus.”
A breakdown of the investments
Across Africa, assets attracted 429 private capital deals entailing venture capital assets, infrastructure, private equity and private debt. Of all these, venture capital accounted for 54% of the total deal value reported in 2021.
AVCA’s Venture Capital in Africa Report, revealed that 604 African startups raised a total of $5.2 billion. Nigeria dominated the VC funding, followed by South Africa, Egypt, Kenya, Senegal, Ghana, and Algeria. Two-point six billion of that was raised from 16 super-sized deals, some of which yielded three more unicorns in Nigeria. Of that chunk, OPay secured $400 million during a Series C investment round and Wave, the Senegal-based mobile money company, raised $200 million in Series A.
As amazing as that sounds, it also reflects a sad truth—the majority of African startups are either struggling to get big sized tickets or have not scaled large enough to earn them.
Is debt financing the new cool?
According to data collected by Briter Bridges, a London-based research firm, at least 6% of disclosed funding to African startups in 2021 is owed to debt financing.
Several new private debt and mezzanine funds are investing in mid-sized African businesses. BluePeak Private Capital, an Africa-focused investment firm which raised $100 million last year for its inaugural fund and is looking to increase this amount to $200 million.
Startups like Trade Depot, Zola Electric, Ampersand, and SunCulture are taking up debt as, unlike with equity, they do not have to cede large portions of their company to investors.
It might be getting harder for startups to get equity investment. Is debt financing the new push African startups need to get to the next level?