A recent report has revealed that investments in African tech startups declined by 28 percent to $2.4 billion in 2023, as the global funding winter continues to bite harder.
Africa, like the rest of the world, has been affected by the global funding winter, with venture capital drying up and several start-ups forced to shut down or significantly restructure their operations.
According to the ninth edition of the annual African Tech Startups Funding Report released by Disrupt Africa, it described 2023 as the “year of the reset” for African tech startup funding.
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The number of funded ventures, and the total funding raised, declined for the first time since 2016, though not as dramatically as many had feared. The number of funded ventures was down 35.9% from 633 in 2022. The number of active investors fell by almost 50%, and merger-and-acquisition activity also witnessed a significant decline.
A total of 406 African tech startups raised a combined total of US$2.4 billion over the course of 2023. Nigeria, Egypt, South Africa, and Kenya, fondly called “the Big Four”, secured a larger share of the total funding between them than in 2022.
Nigeria, however, saw funding decline tremendously shy of $ 400 million, which pushed it into fourth position overall, although it still had more funded start-ups than any other market.
The fintech sector yet again, attracted the most investors in 2022, with more start-ups securing funding than any other sector and a combined total that dwarfed all others. However, as with most other sectors, it saw a steep decline in investment, down 33.4% to $ 964 million.
Yet the fall in fintech funding mirrored that of the general market, meaning there were plenty of sectors that suffered more badly. Nine sectors saw larger percentage drops in total funding, including, in the case of e-commerce and retail tech, its traditionally largest competitor, which saw the biggest decline of all at almost 80 percent.
Nonetheless, despite the general decline in 2023, the number of funded ventures reportedly increased by 224.8 percent since 2015, and total funding is up 1,195 percent.
Average deal sizes have risen, dipped, and plateaued to varying extents, but have now been on an upward trajectory since 2019.
A total of 147 startups raised US$1 million or over in 2022, representing 36.2 percent of the total. This was down from 276 (43.6%) in 2022, which had been up from 206 (36.5%) in 2021 and 110 (27.7%) in 2020.
Egyptian fintech company MNT-Halan set a new record for funding raised in a calendar year, raking in US$510 million in equity and debt capital, while there were also notable raises by Kenya-based energy companies M-Kopa (US$315 million) and Sun King (US$150 million).
Other significant rounds were raised by the likes of South Africa’s Planet42 (US$100 million), South Africa’s Tyme (US$77.8 million), South Africa’s Wetility (US$48 million), Nigeria’s Moove (US$46 million) and DRC’s Nuru (US$41.5 million).
While total funding coming into the African tech space did not decline as sharply as many had predicted, the number of active investors dropped dramatically in 2023 as compared to 2022.
There were at least 527 different disclosed investors in African tech startups in 2023, down by almost a half – 46.6 percent to be exact – on the 987 disclosed in the previous 12 months. The 2022 figure, which was the largest amount of any year on record thus far, was up 28 percent on the 771 tracked in 2021.
Notably, only two sectors, ed-tech, and energy raised larger amounts of funding in 2023 as opposed to 2022, with smaller sectors most damagingly hit at a time at which they had been growing the fastest.