African Startups Reportedly Raised $3.191 Billion in 2023, Signalling Decline.

In 2023, African startups faced a funding challenge, securing $3.191 billion, a significant drop compared to previous years. 

TechCabal reported the figure as $3.2 billion, excluding undisclosed funding. The decline unfolded quarter by quarter, starting with $1.2 billion in Q1, followed by $877.8 million in Q2, and $492.7 million in Q3. Q4 saw a slight increase to $551.2 million. Overall, 2023 marked the lowest funding since 2020, showing a 36% decline from 2022’s ~$5 billion total.

Despite this, the global trend mirrored Africa’s situation, with venture funding steadily decreasing since January 2022. January 2023 saw a drop to just under $40 billion from the previous $60 billion per month. 

Predictions for 2024 suggest a steeper decline, with investors becoming more cautious, startups becoming leaner, and economies facing tougher times in the first half of the year.

Region-wise, North African startups led in 2023 with $1.074 billion, boosted by Instadeep’s $680 million acquisition led by BioNTech. Surprisingly, Nigeria, usually a leader, lagged with $398.2 million, a 66% decline from previous years. 

The Big 4 countries—Nigeria, Egypt, Kenya, and South Africa—raised $2.37 billion, about 74.9% of the total, showcasing a significant shrinkage in funding streams.

In sectors, despite fintech still reigning with 45% of total funding, the energy or cleantech sector saw a surge, dominating funding between June and October 2023, accounting for 43.7% of the capital raised during that period. Kenyan cleantechs led the way with notable deals.

While the decline in startup funding made headlines, the focus on the investors behind these startups also gained attention in 2023. Partech Africa, Knife Capital, P1 Ventures, and others made exciting fund closes. Climate-focused funds, including Novastar’s $200 million Africa People + Planet Fund, also emerged.

Newcomers like Norrsken22, Black Ostrich Ventures, and Seedstars Capital made significant debuts, while established VCs like Ajim Capital and Saviu Ventures closed new funds. 

Angel investors, including prominent names like Paystack’s Shola Akinlade, and companies like Safaricom, joined the funding scene, indicating a growing appetite for Africa’s startup landscape.

Despite the decline in VC funding reported globally, Africa’s situation reflected a broader trend. In Q1 2023, global tech startups attracted $76 billion, only 46.91% of the $162 billion raised in Q1 2022. Africa faced a 53% YoY decline in the first half of 2023, raising $1.43 billion, with a focus on late-stage startups, leading to a drop in funding for early-stage ones.

The challenges extended to various factors, including the Russia-Ukraine war, central bank interest rate hikes, global inflation, and a decline in tech stocks. Startups, both early-stage and matured ones, felt the impact, with some like Dash, Sendy, Where Is my Transport, and 54Gene ceasing operations in 2023.

Despite this funding winter, Africa-focused funds, such as Norrsken22’s $205 million technology growth fund, aim to address the gap, particularly for early-stage tech startups. The sentiment remains positive, with investors showing strong support and excitement for catalysing the growth of Africa’s tech companies.