African startups are beginning to feel the heat of the global economic climate after funding for the first quarter of this year slumped significantly.
According to a report by Disrupt Africa, African tech startups raised $650 million in the first quarter of 2023, representing a 57.2 percent dip, compared to the same period in 2022.
“Eighty-seven startups secured funding in Q1, less than half the number (175) that had done so by this time last year. And those startups have between them taken in a combined US$649,303,000, down from US$1,515,556,000 by April 1, 2022,” stated the African Tech Startups Funding Report.
The report also indicates that the number of funded startups increased by 12.2 per cent on 564 in 2021, while the total secured funding jumped 55.1 percent on $2.1 billion in 2021.
“This crunch we are going through now, the bad times we are going through now, hopefully will be all over in 24-36 months. I’m not saying we’ll be back to the good old days of 2021, but we’ll be back to normalised days where there will be capital and good companies will be able to raise at a good valuation.”
Nigeria dominates Africa’s Startups funding
Further, the survey details how Nigeria, Egypt, South Africa and Kenya are the premier investment destinations on the continent, though funding is also on the rise elsewhere.
“Nigeria was the best-funded country in Africa for the second year running, with 180 start-ups (28.4 per cent of Africa’s funded ventures) raising a combined $976 million (29.3 per cent of the continent’s total) – substantially ahead of all other countries on both counts. In the continent’s other leading startup ecosystems, Egypt and Kenya reported decent growth, while South African funding fell from 2021,” reads the report in part.
Yet, the survey details, “despite a record-breaking year of funding for both Ghana and Tunisia, Africa’s “big four” remains firmly entrenched, with no sign yet that it could in any real way turn into a “five” or “six”. There are, however, signs that funding is starting to become – slightly – more evenly distributed.”
The fintech sector continues to power Africa’s startup funding revolution, yet its share of total funding declined compared to other spaces that witnessed significant advancements.
“The relentless growth of Africa’s fintech space should not, however, detract from positive
developments elsewhere. Indeed, even though total fintech funding increased, its overall
share of investment fell. Non-fintech startups still raised the majority of the capital, with
many sectors enjoying bumper years.”