ALTHOUGH Africa’s blockchain and cryptocurrency funding numbers are small compared to other regions, they are certainly growing, according to the inaugural African Blockchain Report, launched this week by CV VC, an African blockchain early-stage fund, in collaboration with Standard Bank.
Some 33 of the 41 companies included successfully raised funding in the 2021 calendar year. A total of $127 million (R2 billion) was raised throughout 2021, representing a 0.5 percent share of total global blockchain funding.
Eight countries were represented for the period and the majority of venture dollars went to three of Africa’s “Big 4” – Nigeria, Kenya and South Africa.
Rather than Egypt (the other member of the so-called Big 4) being significant in terms of blockchain funding, Seychelles came in fourth, to make up a combined total of $122m, or 96 percent, of funding in the region.
The companies raised $91m in quarter one (Q1) of 2022, a staggering 1 668 percent year on year (YoY) increase from Q1 of the previous year.
When comparing Q1 2021 vs Q1 2022, venture funding for African blockchain startups far outpaced the growth seen in general African venture funding with 1 668 percent compared to 149 percent, showing 11 times the level of growth on a YoY basis.
Quarter two 2022 has gotten off to a quick start, with some noteworthy fundraising by MARA, raising $23m (Nigeria/Kenya), Jambo $30 million (Congo) and Afriex $10 million (Nigeria), the report found.
The report said African blockchain startups had made it past the first bumps in the road and had managed to court capital relatively well to further develop their ideas and ecosystems.
These tides of successful companies would bring waves of other companies and funding, facilitating innovations and driving Africa’s blockchain potential.
Africa had not yet seen a cryptocurrency mega-deal. However, the South African exchange, Valr, had come the closest. The company closed an impressive $50m Series B round in Q1 of 2022, cementing this as the continent’s largest cryptocurrency funding round to date.
Similarly, Africa did not yet boast any cryptocurrency unicorns, although these were expected to begin to emerge within the next two to three years.
As a category, Fintech raised the most funding in 2021 at $67m, representing 53 percent of all cryptocurrency funding. Exchanges followed Fintech, and these two categories account for $101m, or 79 percent, of total cryptocurrency funding.
Globally, venture funding more than doubled last year, with the final figure coming in at $621 billion, completely overshadowing the previous year’s $294bn, a 111 percent increase, with all the geographic areas studied in the report breaking funding records.
The global deal count has increased to 34 647, up from the previous 26 500, representing a growth of 31 percent YoY compared to 2020. The global total unicorn count came in at 959, up 117 percent YoY, which stems from rising valuations in late-stage deals.
Startups in Africa had raised between $4.3bn - $5bn last year across 681 - 820 deals. By averaging these data, African startup funding has increased by 239 percent, with deal counts increasing by 117 percent.
Despite a global pandemic and a slump in crypto asset prices, blockchain companies still managed to bag a significant amount of funding.
In 2021, blockchain companies raised an impressive $25.2bn in funding across 1 247 deals. This represented a 713 percent increase in funding and an 88 percent increase in the deal count YoY compared to $3.1bn and 662 deals in 2020.
The US was still leading the field, with a 56 percent share of the global dollars invested in blockchain. It was clear that blockchain and cryptocurrency venture funding was now becoming legitimised.
A larger number of investors were more readily participating and with larger cheque sizes. Testament to this was that $15.5bn of the total funds raised came from megarounds (funding rounds of more than $100m) and that blockchain companies received just more than 4 percent of all venture funding.
Some 40 blockchain unicorns were born last year, putting the total number of unicorns at 47. Investors were comfortable with the maturing landscape and were actively seeking to fund possible unicorn behemoths. However, early-stage investment deals were more frequent, as they accounted for 79 percent of the number of deals concluded, the report found.
A total of 41 African companies were investigated in the study to help create insights surrounding the blockchain and cryptocurrency venture funding landscape in Africa.
The companies examined had successfully raised funding from the start of the 2021 calendar year to the end of Q1 2022. Throughout this period, $218m was raised in various types of rounds.
CV VC Africa’s Gideon Greave said: “Our objective with the African Blockchain Report is to share a data-driven account of blockchain in Africa and begin an annual collation of benchmarkable venture data and solidly referenced African insights.
“We are also very proud to give an assessment of the regulatory landscape and a magnetic introduction to some of the greatest blockchain minds on the continent. We are already active in Africa, have invested in 12 startups, and are very excited about the launch of an African Blockchain Early-Stage Fund,” he said.
The Swiss Embassy’s chargé d’affaires in South Africa, Véronique Haller, said blockchain had the potential to be a catalyst for positive change and shape the future of our continent.
“With data in and around blockchain in Africa still scarce, the first Africa Blockchain Report will be an important milestone. And let’s bet that Africa will soon be home to its first blockchain Unicorn!”
The authors of the report noted that the holistic picture for startup ventures in Africa was encouraging. They said the continent had seen year-on-year growth in startup funding for the past four consecutive years and would likely see an increase for the year 2022 as well.
“There has never been a shortage of ideas or talent in Africa, and it finally seems as though the availability of early-stage funding is increasing consistently. The above having been said, one of the challenges faced in Africa is the availability and reliability of data. Several firms have taken it upon themselves to codify and summarise figures for the continent, but each uses varied methodologies to arrive at big-picture figures.”
The authors of the report noted that the African blockchain industry was still in its infancy, yet its potential was untapped and unfathomable.
"Despite regulatory uncertainty, several companies have established themselves and offer blockchain solutions to their respective industries and the African population. Our data collection and research process identified 41 such companies that received funding between January 2021 and March 2022. We present these as illuminating examples of the possibilities achievable by the brilliant minds integrating blockchain technology into Africa’s industries."
BUSINESS REPORT