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Fad or trend? How to interpret the explosive growth in African VC

Updated: Jul 19, 2022

2021 was another record year for African startups, with tech and fintech in particular leading the way. The sector’s breakneck pace is not surprising, given Africa’s young and tech-savvy population. Armed with smartphones and access to the internet, the continent’s poor traditional infrastructure is being overtaken by a digital revolution.

Up from an estimated US$2 billion in 2019, African venture capital (VC) topped US$4 billion in 2021 - a staggering 100% increase in the space of two, very challenging years.

While the data speaks for itself, the question remains whether this is a bullish trend with no turning back or merely a bull market fad with a shelf life.

To unpack this, let’s go back to basics and explore the supply and demand dynamics.


With global interest rates at an all-time low and liquidity across most asset classes at an all-time high, investment in perceived riskier sectors like VC and less developed markets like Africa has increased. But what will happen now that global interest rates are starting to rise? Will the supply of capital in developing markets dry up? Will “riskier” investments suffer the same fate?


History teaches us that when global monetary policy tightens up, investment in Africa wanes, relatively speaking. But looking at the trend, even before the Covid-19 pandemic dragged much the world’s economy into shaky territory, African VC investment was on the rise.

While it’s clear that the liquidity in the system supercharged investment in the space over the past two years, the fundamentals point to a rising investment class – even during times when interest rates were higher. The evidence suggests that the upward trend and injection of capital into African VC investment is likely to continue.

What remains unknown is whether the rate of supply of capital will continue to increase.

On the one hand, there may be a global flight to safety in the coming years which may negatively impact the supply of capital in Africa. On the other hand, African VC as an asset class is well on its way to proving its place in the global investment market, which is likely to largely counterbalance this.


There is no shortage of credible opportunities to back in Africa’s thriving tech space. As mobile penetration continues to increase and access to affordable and reliable data improves, more entrepreneurs will take advantage of the buoyant opportunities in the market.

And ambitious entrepreneurs are wasting no time bringing their products to market on the continent. Last year, 754 reported VC deals were completed in Africa, up from 319 in 2020 and 140 in 2019. That’s a 438% increase in two years.

Added to this is the recent trend of returning skills. Africans who have studied and upskilled abroad are returning home - bringing skills, best practices, and networks with them.

What’s more, the rise of African unicorns, accelerators, credible local investors, and an increased number of exits also point to the sector’s continued sustainable potential.

With all these factors at play, while it is still relatively early days in the African VC space, all signs point towards the continued upward growth in the market, dispelling any sentiment that it is merely a fad. And befriending the trend, with a high performing portfolio of investments, a pipeline of quality opportunities, and continued local and international investor interest in the sector, at HAVAÍC we are incredibly excited for the year ahead and look forward to many, many years of smart investing in Africa.

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