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The aggregate deal value of U.S. VC investments in Africa totaled $3.7B in 2022, per Preqin data. The aggregate deal value was $900M in 2020 and $2.8B in 2021. Due to the vast untapped potential in Africa, the region is attracting VC investments from the U.S. In 2021, African tech startups raised $4.8B in VC funding from global investors. In the same year, five African startups cemented their status as unicorns. The inflow of U.S. investments into Africa is poised to increase, especially after U.S. Vice President Kamala Harris committed to "double down" on investment and increase U.S. presence in the region. Harris visited Ghana in March, making her the highest-ranking official in the Biden administration to travel to Africa so far this year. U.S. investors have primarily invested in software and financial services sectors. African software startups accounted for 158 of the 562 U.S.-funded deals in the region in the last three years, representing nearly 30% of the total. Fintech startups have raked in the second-highest share of deals, securing funds from U.S. investors in almost 149 deals. Investments into fintech startups witnessed exponential growth after the pandemic highlighted the need to expand financial access across the region. McKinsey predicts the fintech sector could potentially grow eight times its current market size by 2025.
The African nations of Kenya, Nigeria, and Egypt raked in the majority of the funding. U.S. investors participated in 163 VC deals in Kenyan startups in the past three years. The nation has introduced tax amendments in order to make the country more attractive to investors. Additionally, Kenya has a robust telecommunications infrastructure in place. The U.S. Department of State's 2022 Investment Climate report described it as "the strongest macroeconomic fundamentals in Africa," making the nation more popular with U.S. investors. In the past three years, Nigerian startups saw 136 deals with participation from U.S. investors. The nation has passed economic reforms and reduced the time to set up startups in a bid to attract additional foreign investments. Egypt has seen 86 VC deals involving U.S. investors in the past three years. The local government intends to capitalize on the increased investments from foreign investors with a list of reforms explicitly aimed at private sector investments. U.S. investors in Africa are primarily private wealth firms with expertise in emerging markets. Foundations account for a quarter (235) of the total 1,000 U.S. investors that are actively investing in Africa. Public and private pension funds represent the second and third largest share of investors, respectively, consisting of 206 and 147 investors. 135 endowments and 46 insurance firms also actively invest in the region. While Africa looks like a good investment destination, the region is not immune to the global VC funding pullback. VC funding declined by 57.2% YoY in Q1 2023. |
