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As venture capital activity slowed globally last year, Kenya defied expectations by recording the strongest growth in funding raised in Africa. Reports show that the number of transactions and value to the country have exceeded 2021 figures due to increased investor interest.
Data from a market intelligence company Briter BridgesAnd The big deal shows that Kenya raised $1.1 billion, more than double the funding obtained by East Africa’s largest economy in 2021, when the continent raised around $5 billion.
Partech placed Kenya fourth on the list of top venture capital destinations, after Nigeria, South Africa and Egypt respectively. The four markets account for more than 70% of total venture capital funding in Africa.
Briter, which included this year’s country rankings, and Big Deal positioned Kenya as the second-largest venture capital destination after Nigeria, which took the lead after raising $1.2 billion, despite falling the number and value of transactions. Compared to the previous year, the amount invested in Nigeria decreased by more than 36%, according to Partech, and by 20% according to Big Deal data. South Africa’s funding has stagnated according to Partech while Big Deal data shows a 42% drop.
Reports show that Kenya recorded the strongest growth on the continent, while Egyptian venture capital funding also increased slightly. Overall, Africa reported an increase in the amount invested last year; Partech estimates this figure at $6.4 billion, Briter Bridges at $5.4 billion and Big Deal at $4.8 billion.
Clean technologies and e-commerce
Almost every sector in Kenya has seen increased interest from venture capital; however, the cleantech, e-commerce, fintech, and food and agriculture verticals accounted for the bulk of the activity.
The clean technology sector attracted the greatest venture capital interest in Kenya, as it accounted for almost half of the total capital raised by Kenyan venture capital-backed private companies – supported by The Sun King’s mega round And Financing of M-Kopa. Both PAY-Go companies provide solar home systems, but M-Kopa’s platform now includes financing for a range of products and services.
Other cleantech projects that have attracted venture capital support include BasiGo, an electric vehicle startup that is attempting to electrify Kenya’s public transportation sector, currently dominated by fossil fuel buses.
Investor interest in cleantech companies aligns with a global trend over the past year, which has seen more capital pumped into companies that mitigate climate change. Cleantech and climate verticals, and specifically in Africa, are expected to continue to attract venture capital dollars amid a slowdown in funding.
Scale-ups in the e-commerce sector like Wasoko And Market strength; B2B platforms allowing informal traders to source goods directly from manufacturers and distributors; And Copy, an e-commerce platform that leverages its agent network to serve customers in rural areas, has also attracted investors. The aforementioned transactions resulted in large rounds that saw the vertical emerge as one of the sectors most positively impacted by venture capital funding.
Fintechs too continued to attract most funding to the continent as Africa, the world’s second-fastest payments and banking market, grows. However, in Kenya, the vertical sector comes third in venture capital preference, assessed in terms of deal value. On the other hand, the vertical sector saw the most activity in terms of number of transactions.
Meanwhile, even though Kenya saw huge growth last year, the market was not spared from the effects of the venture capital downturn, as some companies like Kune and WeFarm closed their doors, while others like Twig, Send And Market strength reduced their workforce as they adapted new realities in fundraising.