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African Startups Funding Report 2023: A Year Of Challenges And Opportunities

african-startups-funding-report-2023-a-year-of-challenges-and-opportunities

After defying the global funding slowdown of 2022, VC investments in African startups dropped considerably last year, mirroring the situation in other regions where capital taps were significantly turned off. The drop, however, was not unexpected as months preceding the year, deals had become infrequent as investors began to pull away. Data trackers set the amount raised by African startups in 2023 at between $2.9 billion and $4.1 billion, from $4.6 billion to $6.5 billion in total funding the previous year.

Key Takeaway

African startups faced a challenging funding landscape in 2023, with a considerable drop in VC investments. However, there were opportunities for growth and diversification, particularly in emerging markets and sectors beyond the traditional top four African VC markets.

The Funding Landscape

  • Total Funding and Debt Growth: Partech reported a 46% drop in total VC funding in Africa, with equity investment dropping by 54% and debt funding seeing a 22% year-on-year drop. The Big Deal noted a 39% drop in total funding, with equity funding dropping by 57% and debt growing by 47%.
  • Market Representation: The top four markets—Kenya, Egypt, Nigeria, and South Africa—remained dominant in securing substantial investments, while French-speaking nations and other emerging hotspots saw increased representation.
  • Investor Involvement: There was a significant decrease in the number of investors participating in funding rounds in Africa, with a 50% decrease in 2023 compared to the previous year.
  • Sector Breakdown: Fintech continued to lead as the best-funded sector, followed by cleantech, logistics and transport, health, and agriculture, reflecting continued sectoral diversification.
  • Gender Representation: Despite marginal gains, funding into all female-founded companies remained a meager fraction of that going to male-founded companies, highlighting the need for greater support for female-led startups.

Opportunities in Emerging Markets

While the funding landscape presented challenges, there were opportunities for growth and diversification in emerging markets and sectors beyond the traditional top four African VC markets. Investors diversified their risks with more funding and deals in other regions like Francophone Africa, exploring beyond the traditional top four African VC markets – Egypt, Kenya, Nigeria, and South Africa. These four countries took a massive funding hit in 2023.

Investor Involvement and Sector Breakdown

Partech reported a significant drop in the number of investors participating in funding rounds in Africa, witnessing a 50% decrease in 2023 compared to the previous year. Fintech continued to lead as the best-funded sector, followed by cleantech, logistics and transport, health, and agriculture, reflecting continued sectoral diversification.

Gender Representation in Funding

Despite marginal gains, funding into all female-founded companies remained a meager fraction of that going to male-founded companies, highlighting the need for greater support for female-led startups.

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