According to the ninth iteration of the annual African Tech Startups Funding Report released by startup news and research portal Disrupt Africa, made available freely as part of an open-sourcing initiative in collaboration with Flourish Ventures, AAIC Investment, and Atlantica Ventures, African tech startup investment experienced a 28% decline to $2.4 billion in 2023 as the global “funding winter” began to impact.
While the African tech sector demonstrated remarkable growth in 2022, surpassing the $3 billion mark in total funding for the first time, 2023 marked a notable shift. A total of 406 startups collectively raised $2.4 billion throughout the year.
Despite ranking as the third-best year for funded ventures and the second-best for total capital raised, 2023 witnessed a significant decrease compared to 2022. The number of funded ventures dropped by 35.9%, with a 27.8% decrease in total capital raised. Additionally, the number of active investors decreased by nearly 50%, and there was a notable decline in M&A activity.
This decline marked the first contraction in the sector since 2016. However, the drop in funding, which was less severe than earlier projections of a 50% decline, reflects the global impact of the “funding winter,” where venture capital became scarce, leading some prominent startups to either cease operations or undergo substantial restructuring.
Nigeria, Egypt, South Africa, and Kenya maintained their positions as Africa’s “big four” in terms of funding, collectively securing a larger portion of total funding compared to 2022. Nigeria experienced a significant decline of 59% to just under $400 million, pushing it to fourth place behind Kenya, Egypt, and South Africa.
Fintech remained the most attractive sector for investors, with a substantial number of startups securing funding. However, like other sectors, fintech also saw a sharp decline in investment, down 33.4% to $964 million.
The report, available for free download, includes a comprehensive list of funded startups, investors, and amounts raised, along with in-depth analysis of investment trends across key startup geographies and verticals, as well as data on African startup acquisitions.
Disrupt Africa co-founder Gabriella Mulligan noted that while 2023 posed challenges for African tech funding, it reflected global trends rather than issues unique to Africa. Co-founder Tom Jackson expressed optimism, anticipating a rebound in investment over the next 12 to 18 months.
Previously available for purchase, the African Tech Startups Funding Report is now freely accessible, thanks to partnerships with Flourish Ventures, AAIC Investment, and Atlantica Ventures, aiming to benefit African entrepreneurs and ecosystem stakeholders.
Flourish Ventures’ venture partner Ameya Upadhyay expressed optimism about the continent’s tech ecosystem, while Hiroki Ishida from AAIC Investment emphasized the importance of continuous information dissemination. Aniko Szigetvari, founding partner at Atlantica Ventures, highlighted the report’s significance for startups and investors in the region.
Source: Disrupt Africa