As the African startup ecosystem continues to flourish, with innovation and entrepreneurship on the rise across the continent, the first half of 2023 saw the total investment into the continent drop by more than half the total from the corresponding period in 2022.
According to the most recent edition of the annual African Tech Startups Funding Report released by Disrupt Africa, 633 African tech startups raised a combined US$3,333,071,000 in 2022, a 12.2 per cent increase on 564 in 2021, while the total secured funding jumped 55.1 per cent on US$2,148,517,500 in 2021.
The year 2023 however has been a regressive one, the figures show that in the first 6 months of the year, only 131 African tech startups have received a combined sum of US$1.19 billion, down from 303 startups and US$2.275 billion in H1 of 2022.
That’s a decline of 52.4 per cent, which is in line with the quarter-on-quarter figures from Q1, which fell by 57.2 per cent.
Breaking down the funds by countries, Egypt recorded the most disclosed deals – $442.55 million, followed by Kenya – $344.30 million, South Africa – $329.55 million and Nigeria – $166.45 million.
The Top Performing Sectors
Fintech remains a dominant force in African startup funding, raking in 71% of all funding. With a growing demand for financial service solutions across the continent, fintech startups have attracted substantial investment. Digital payment platforms, mobile banking solutions, and lending platforms are addressing gaps in traditional banking systems, improving financial inclusion, and generating investor interest.
Healthcare follows fintech with a significant gap, The funding into this sector is due to the ongoing health challenges present across Africa. The startups that received funding are leveraging technology to provide solutions for healthcare delivery, diagnostics, telemedicine, and more.
The funding is expected to help these startups to:
- expand their services,
- enhance medical infrastructure, and
- improve access to quality healthcare, especially in underserved areas.
E-commerce follows in the third position, this can be attributed to the growth of e-commerce and the need for efficient logistics solutions, as consumer behaviour shifts towards digital channels.
A report by Technext shows that startups with fewer founding members make up 65.7% of startups that have raised money for the first half of the year.
This might be due to several reasons, one of which might be that decision-making tends to be faster and more efficient compared to having a larger founding team.
Here are the top raises by African startups in the first half of 2023.
- MNT-Halan ($400 million)
- M-Kopa ($200 million debt + $55 million equity)
- Sun King ($130 million)
- Planet42 ($100 million equity and debt funding)
- TymeBank ($78 million pre-Series C)
- Victory Farms ($35 million)
- Lulalend’s ($35 million)
- Peach Payments ($31 million Series A)
What to Expect in H2 of 2023
The overall Tech funding predictions for African startups in 2023 vary, but most of the experts agree on one thing, which is that there would be a decline from what was seen in 2021/22.
Some of the reasons for the proposed decline include – the global economic downturn and continuous rising inflation across the globe.
With this knowledge, what then, is the future of African startups?
The future of African startups is bright. The continent has a young, growing population, a rapidly expanding middle class, and a rapidly growing economy, which creates a huge market for African startups to tap into.
Overall, the first half of 2023 hasn’t been a positive one in terms of funding. However, amidst this scenario, there’s a silver lining – a level of increased interest from international investors. Notably, the growth of the fintech sector shines as a sign that the ecosystem is maturing and becoming more competitive.
The African startup ecosystem is looking bright as they are positioning themselves to play a significant role in driving the continent’s economic development.