In what marked a rebound compared to what was raised in the previous month, a report by Africa: The Big Deal, revealed that startups in Africa raised $187 million in funding.
In April, data revealed that African startups raised $75 million, representing a 149% increase in funding for the continent’s startups last month.
The figures recorded in May, made it the second-highest month in terms of fundraising in the past 6-month period. A total of 64 ventures received at least $100k in funding, a very high number compared to previous months.
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The total funding announced last month was split between 4% in grants, 31% in equity, and 65% in debt ($122m, including $51m for M-KOPA and $50m for Spiro). In addition, 3 exits were recorded in May, which include; Lesaka’s technology acquisition of online payment platform Adumo for $85m.
Busbud’s acquisition of Ratality in South Africa to integrate revenue management capabilities into its platform, and the much-discussed Paystack-led consortium acquisition of Brass.
The report disclosed that since the beginning of the year, $729 million has been announced in funding (excluding exits), which still lag behind previous periods.
Part of the report reads,
“As numbers can fluctuate quite heavily on a monthly basis, it is more significant to compare numbers over longer periods, for instance 2024 ‘year to date’ to previous comparable periods (Jan-May, ‘J-M’), to account for seasonality.
“Since the beginning of the year, $729m have been announced in funding (excluding exits), a total still lagging behind previous periods: $1.7b in J-M 2023, $2.7b in I-M 2022 and $1.1b in J-M 2021. However, in terms of number of ventures raising at least $1m, 2024 so far compares rather well to some previous years: 90 vs. 95 in J-M 2023 and 91 in J-M 2021 (2022 was exceptional though with 200 ventures involved in $1m+ deals in Jan-May)”.
In a notable trend, two previous trends were identified to be re-occurring. The shares of funding to climate-related ventures continued to rise from 19% in Jan-May 2021, grew to 23% in J-M 2022, 32% in J-M 2023, and so far in 2024, recorded 44% of all the funding announced (exits).
Also, the weight of debt financing is confirmed by the masters numbers. It represented 35% of all funding announced in January to May 2024, in line with the previous period (38% in J-M 2023), and in stark contrast with the previous years between 4% and 8% for comparable periods in 2019-2022.
Despite the resurgence in funding recorded in May, the African tech startup funding space is still suffering from a paucity of investment inflow. In 2024 so far, the continent has attracted $729 million between January and May. This is a huge decline compared to the $1.1 billion recorded within the same time frame in 2021, $2.7 billion in 2022, and $1.7 billion recorded in the same time limit in 2023.
However, looking ahead, the surge in investment in May 2024 sets a positive tone for the rest of the year, indicating robust growth prospects for African startups. As these companies continue to innovate and expand, they are poised to make significant contributions to economic development and technological advancement on the continent.