- Tech funding in Africa hits four-year low amid global VC downturn
- Climate tech receives significant investment, accounting for 45% of all startup funding in Africa
- Fintech secures the most funding for startups raising $1 million or more
- Female-founded and female-led startups receive minimal funding, with majority going to ventures without female founders
- VC investments in Africa drop by 31%, but hope remains as new funds are closed to support early and growth-stage startups
African Tech Funding Hits Four-Year Low Amid Global VC Downturn
In the fast-paced world of technology and startups, the recent news of African tech funding hitting a four-year low amid a global venture capital downturn has raised eyebrows and concerns within the ecosystem. The decline in venture capital investments in Africa, totaling only $780 million in the first half of the year, marks a -31% drop compared to the previous period. This downturn can be attributed to various factors, both global and local, impacting the flow of capital into the continent’s tech sector.
The Impact of the Funding Downturn on African Startups
The decrease in funding has had a notable impact on the African startup landscape, with startups facing challenges in securing the necessary resources to scale and grow. Despite the overall decline, there have been interesting trends in the distribution of investments. A significant portion of the funding was directed towards climate tech, which accounted for 45% of all startup funding in Africa this year. Fintech, while second in total amount raised, saw the most startups securing $1 million or more during the period.
However, a concerning trend persists in the funding landscape, with female-founded and female-led startups continuing to receive minimal financial support. Reports indicate that 85% of funding went to ventures without a female founder, while 92% went to companies led by male CEOs. This disparity underscores the need for greater diversity and inclusion in the tech funding ecosystem, ensuring that all entrepreneurs, regardless of gender, have equal access to funding opportunities.
Related Video
The Way Forward for African Tech Funding
Despite the challenges posed by the funding downturn, there is optimism for the future of tech funding in Africa. Dotun Olowoporoku, Managing Partner of Ventures Platform, highlights the opportunity for improvement as several VC funds have recently been closed, providing significant capital reserves specifically for early and growth-stage startups in Africa. This influx of capital could inject new life into the tech ecosystem, supporting the growth and expansion of innovative startups across the continent.
To enhance tech funding in other African countries and foster a more inclusive ecosystem, Olowoporoku identifies seven main factors that are crucial for enabling growth in the tech ecosystem. These factors include the availability of seed risk capital, high-capacity technical talent, an expanding market, regulatory support, and stable political conditions. By addressing these key elements and overcoming obstacles, African nations can create a conducive environment for tech funding to thrive.
Kristin Wilson, Managing Partner of Innovate Africa Fund, recognizes a shift in investment strategies, with investors becoming more selective and focusing on startups with robust business models and clear paths to profitability. She emphasizes the importance of due diligence and sustainable, scalable solutions, particularly in sectors like fintech and climate tech. Wilson also anticipates a wave of consolidation within the tech ecosystem as weaker startups may need to concede to acquisition offers from stronger players.
For entrepreneurs navigating the current funding landscape, Wilson advises a focus on strengthening business fundamentals, building internal alignment, and leveraging mentorship opportunities. By prioritizing revenue models, operational efficiency, and stakeholder alignment, founders can position their startups for success in a competitive and challenging funding environment.
While the tech funding downturn presents challenges for African startups, it also creates opportunities for innovation, resilience, and strategic growth. By embracing diversity, fostering inclusivity, and prioritizing sustainable business practices, the African tech ecosystem can weather the storm and emerge stronger and more vibrant than ever before.
Links to additional Resources: