While VC activity slowed globally last year, Kenya defied all expectations to record the strongest growth in funding raised in Africa. Reports show that the number of deals and value to the country surpassed 2021 figures thanks to increased interest from investors.
Data from market research firm British Bridgesand The great DeaI show that Kenya raised $1.1 billion, more than double the funding East Africa’s largest economy received in 2021, when the continent raised about $5 billion.
Another report of Partechwhich excluded Sun King’s mega-round also shows Kenya’s funding rising 33% last year to a record $758 million.
Partech ranked Kenya fourth in its list of top VC destinations in Africa, behind Nigeria, South Africa and Egypt respectively.
Briter, which topped the country ranking this year, and Big Deal positioned Kenya as the second VC destination after Nigeria, which took the lead after raising $1.2 billion despite the number of deals and the drop in value. Compared to last year, the amount invested in Nigeria fell by more than 36% according to Partech and 20% according to Big Deal data. South Africa’s funding has stagnated, according to Partech, while Big Deal data shows a 42% decline.
The reports show that Kenya posted the strongest growth in the continent as Egypt’s venture capital funding also grew slightly. All in all, Africa reported an increase in the amount invested last year; Partech estimated the figure at $6.4 billion, Briter Bridges at $5.4 billion and Big Deal at $4.8 billion.
Clean tech and e-commerce
Nearly all sectors in Kenya experienced increased interest in venture capital, but cleantech, e-commerce, fintech, and food and agri verticals accounted for the bulk of activity.
The cleantech sector received the largest VC stakes in Kenya as it accounted for nearly half of the total capital raised by Kenyan private venture backed companies – backed by Sun King’s mega-round and M-Kopa funding. Both PAY-Go scale-ups are solar system providers, but M-Kopa’s platform now includes financing for a range of products and services.
Other cleantech ventures backed by venture capital include BasiGo, an EV startup seeking to electrify Kenya’s public transport sector currently dominated by fossil fuel buses.
Investor interest in cleantech companies ties in with last year’s global trend of more capital being injected into companies that mitigate climate change. The clean and climate technology verticals, and more specifically in Africa, are expected to continue to pull VC dollars amid a funding slowdown.
Scaleups in the e-commerce sector such as Wasoko and MarketForce; B2B platforms that allow informal traders to source goods directly from manufacturers and distributors, and Copia; an e-commerce platform that uses its network of agents to serve rural customers also attracted investors. The above sparked major rounds in which the vertical market emerged as one of the most positively impacted by VC funding.
Fintechs also continued to attract the most funding on the continent as Africa, the world’s second fastest payments and banking market, grows. However, in Kenya, the vertical ranked third in VC preference when judged by deal value. On the other hand, the vertical experienced the most activity in terms of deal numbers.
Despite Kenya experiencing tremendous growth last year, the market was not spared the effects of the VC slowdown as some companies such as Kune and WeFarm went bankrupt, while others such as Twiga, Sendy and MarketForce reduced their workforce as they adapted to new fundraising realities.