Kenyan Startups Saw The Most Funding Growth In The First Half Of 2022

In an earlier published article titled “Amid a global decline in startup funding, Africa continues to experience a funding surge,” we discussed how the continent of Africa is not slowing down in terms of funding compared to startups in other countries/regions that are seeing a decline in the wake of current macroeconomic realities. We highlighted how Africa’s under-served population overcame the impact of factors such as inflation, slowing economies, etc., and how Africa continues to be the hub of funding amid a global trend of slowing investments, lay-offs, bankruptcies, etc., that have ravaged the tech/startup space.

In this article, we’ll be going deeper and comparing startups from various parts of Africa and how they performed in the first quarter. But before then, let’s recap some of the numbers startups in Africa have compared to their counterparts in other parts of the world. According to research firm Africa: The Big Deal, in the first half of 2022 African startups received $3.14 billion in funding. Europe saw a decline of 3.7 percent in funding while Latin America and the Caribbean had a decline of 43 percent. African startups have already raised $1.3 billion in the ongoing second half, adding to the $3.14 billion raised in the first half of the year.

While startups in Africa collectively raised $3.14 billion in funding in the first half of the year, startups in Kenya raised almost a billion dollars of that amount in funding in the first half of this year. This year, startups in Kenya have exceeded what they raised in the first half of last year. Typically, one out of the big four – Nigeria, Egypt, South Africa, and Kenya – is expected to raise the most of any funding due to several factors, but this year Kenya has exceeded the expectation of funding growth. The country has shown the most gain so far this year.

According to data from the Big Deal, Kenya raised a total of $820 million in the first half of 2022 and this was accomplished through 76 deals. Compared to the same period last year when the startups in the East African country raised $157 million, a growth of 422 percent was experienced this year.

Startups in Kenya have shown the most growth this year. This is because, according to various data compared for this article, startups in Kenya raised between $400 and $600 million in startup funding for the whole of last year. The company came fourth last year in the whole of Africa in terms of funding; the last out of the big four. Last year, the big four raised almost $2 billion in startup funding.

Kenya is currently behind Nigeria in terms of the number of deals and the amount of funding raised. According to data from the Big Deal which only considers deals that have been made public, Nigeria is in the lead with 160 deals and $864 million raised in funding. Compared to Kenya which saw a funding growth of over 400 percent, Nigeria saw a 128 percent increase in funding growth compared to the first half of 2021. Last year Nigeria raised almost 41.8 billion in funding. The country was the top destination for venture capital investment last year and with the rate at which Kenya is going, overtaking the title from Nigeria isn’t impossible this year.

So far this year, Egypt and South Africa are behind Nigeria and Kenya, tagging at third and fourth positions respectively. Egypt has secured 71 deals and $538 million in funding so far, while South Africa has secured 53 deals and $392 million in funding so far this year. Egypt, however, showed the second highest funding growth after Kenya. Egypt saw its funding growth increase by 244 percent in the first half of 2022. Nigeria followed next and South Africa which was the second top destination for venture capital investment last year saw a marginal 2 percent growth in VC funding. Together, the big four account for 87 percent of all the funding raised by African startups.

The growth that Kenya experienced in the first quarter of this year is quite noteworthy because of the current business environment and macroeconomic challenges being faced by businesses across the world. While the rest of the world battles with challenges like inflation, the case might just be different for African startups.  “Macro trends affecting developed-market tech names will be less impactful to Africa. Klarna, Paypal, and others are being hit by fears over inflation and what that means for consumer transactions. Africa’s story is more around bringing the under-penetrated market online,” Lexi Novitske, a general partner with Norrsken22, an Africa-focused tech fund that was set up by Swedish startup founders, said.

The increase in deals alongside the size of these deals pushed Kenya to the front of the queue. The company saw notable deals worth over $100 million in the first half of 2022, and two of the most significant of them all are Sun King’s $260 million Series D funding and B2B retail and e-commerce platform Wasoko’s $125 million Series B funding.

Kenya’s increased deal flow is an indication of growing interest in African startups and growing VC funding within the continent. Although Africa has the smallest portion of funding across the world, it recorded the most growth in the first half of this year. With $3.14 billion raised in the first half of this year, the continent doubled what it raised last year. Africa also has the most growth potential. According to a post the Big Deal shared, “If we look at the year on year (YoY) evolution of quarterly funding (comparing Q2 2022 to Q2 2021), Africa is simply the only region that continued growing YoY.”

Fintech continues to be the continent’s biggest category and Africa is the world’s second-fastest-growing payments and banking market, just behind Latin America, according to a study conducted by McKinsey. If funding in Africa continues to tow this path, startup funding could exceed the record $5 billion raised in 2021.