African startups faced continued funding challenges into 2024, securing $85.6 million across 42 deals in January, a notable decrease from the figures seen in recent years for the same month. However, the number of deals remained above the levels observed before 2021, as reported by Briter Bridges in their monthly funding activity email update.
The amount raised in January 2024 pales in comparison to previous years, with over $100 million secured in January 2023 and more than $400 million in January 2022. To find a similar figure to January 2024, one would have to look back to January 2017, as illustrated in the email’s chart. The chart also highlighted that most deals at the start of the year are typically continuations from the end of the previous year, with January’s funding landscape reflecting a focus on early-stage investments.
Briter Bridges provided further analysis, identifying fintech as the leading sector in both the number of deals and the total funding secured. The fintech sector saw the highest funding with 11 deals, with payment service startups accounting for 6 of these transactions.
Kenya remains the prime destination for startup funding in Africa, capturing 45 percent of the continent’s investment. According to the report, besides Kenya, the other nations in the ‘Big 4’ round out the top five funded locations. Notably, in January 2024, Ethiopia emerged as a significant player, securing the third spot, largely due to a substantial investment in the Agritech startup Hatch Africa.
The majority of transactions in January fell within the $1,000 to $1 million range. Abel Boreto, Investment Director at Novastar Ventures, commented on the subdued funding figures for January, suggesting that “2024 might be another challenging year for the African startup ecosystem.”
He further noted, “Companies in Africa will need to continue to radically reshape their business models and drive towards profitability and sustainability more rapidly to navigate through the current ‘funding winter’ successfully.”
In 2023, startups across the continent secured $4 billion in funding, marking a 23.08 percent decrease from the $5.2 billion raised in 2022, as detailed in an earlier report by Briter Bridges.
The report, titled ‘Africa 2023 Investment Report: Crisis or Adjustment?’, suggests that the funding slowdown represents a strategic shift rather than a crisis. It elaborates, “We may be witnessing a period of reconfiguration or adjustment, following two years of abundant cash flow post-Covid-19, which saw valuations soar and high liquidity forcing investors to vie for increasingly costly deals.”
This adjustment period has led to a situation where businesses, inflated in value, struggle to find a market of investors willing to invest under less favorable conditions, resulting in stagnation or forcing some to downsize or close.
In 2023, Kenya led the pack in attracting funding, with $806 million, followed by Egypt with $675 million, Nigeria with $575 million, and South Africa with $565 million.
Given the challenges of 2023, which was a tough year for startups compared to previous years, experts anticipate that startups will need to become more inventive as funding becomes scarcer.
Reflecting on the investment climate, Offiong Isyah, an investor at Microtraction, expressed in Briter Bridges’s 2023 investment report, “We are confident in the growing quality and pool of talent in Africa. As African startups reach local and regional growth limits and seek to mitigate currency risks, we expect them to develop products with a global market in view. Furthermore, we hold a positive outlook on startups that empower the creator economy and the future of work. We believe that AI and web3 technologies will offer a significant boost for African founders, enabling them to establish global businesses.”
