In 2023, African startups secured $3.191 million in funding, indicating a significant downturn compared to previous years.
According to Africa: The Big Deal, a meticulously curated funding database, African startups garnered $3.4 billion in 2023. In contrast, TechCabal reports a slightly lower figure of $3.2 billion, attributing the variance to differing definitions of funding criteria. Notably, both sources exclude undisclosed funding and estimates from their calculations. The funding landscape witnessed a quarter-on-quarter decrease from Q1 2023, where $1.2 billion was raised, to Q2 with $877.8 million, and further to Q3 with $492.7 million. However, there was a modest recovery in Q4, which saw startups raising $551.2 million.
Whether at $3.2 billion or $3.4 billion, it is evident that 2023 represents the lowest funding for African startups since 2020’s $2.1 billion, marking a 36% decline from the approximately $5 billion total recorded in 2022.
Despite the decline in venture funding, which is not limited to Africa but rather a global phenomenon, there is a silver lining to the grim statistics. According to Crunchbase, the once formidable stream of VC funding has been consistently dwindling since January 2022, when global tech funding last surpassed $60 billion per month. In January 2023, it descended to just under $40 billion, and in November 2023, a modest $19.2 billion was raised, offering a glimmer of hope.
However, the ominous forecast for 2024 suggests a steeper decline, with predictions from tech leaders indicating a more cautious approach from investors in choosing where to allocate their funds. Out of 23 tech leaders consulted for the 2023 Wrapped article, 10 foresaw a trend of more frugal investors, leaner startups, and challenging economic conditions, at least in the initial half of the year. Similar sentiments were echoed by investors at global funds like Thomvest Ventures and QED, as reported by Business Insider.
Despite the challenging outlook, there is a positive perspective on this gloomy news within the tech industry. As Healthcap founder Ola Brown notes, some of the world’s largest tech companies, including Apple, WhatsApp, Slack, Microsoft, Amazon, and Uber, emerged during what is termed as “venture capital winters.” These periods of funding scarcity often drive companies toward sustainable growth and innovation.
Examining regional performance, North African startups took the lead in 2023, securing $1.074 billion in raises. This achievement was notably influenced by Instadeep’s $680 million acquisition led by BioNTech. In the face of challenging economic conditions, funding across Africa’s leading quartet, comprising Nigeria, Egypt, Kenya, and South Africa, witnessed a contraction. The Big 4, historically representing the countries receiving the highest investor attention, collectively raised $2.37 billion, constituting approximately 74.9% of the total funding. Interestingly, Nigeria, typically a frontrunner, finds itself at the bottom of the ladder this year, securing just $398.2 million, while Kenya claims the top spot with an impressive $756.2 million in funding.
Follow full story at: TechCabal