Key Highlights
- African startups raised only $780 million in the first half of 2024, representing a 57% drop compared to the same period in 2023 and a 31% decrease from the second half of 2023.
- Investment remains heavily focused on the “Big Four” countries – Nigeria, South Africa, Egypt, and Kenya – which accounted for 80% of the total funding.
- The Transport & Logistics sector emerged as the leading recipient of funding, while Fintech saw the highest number of startups raising $1 million or more.
- Funding for female-founded and female-led startups remained low, with only 15% of total funding going to female-founded ventures and 8% to those led by women.
The first half of 2024 has witnessed a significant downturn in startup funding across Africa, marking the quietest semester since late 2020.
According to a comprehensive report by The Big Deal, an African tech funding tracker, startups on the continent raised only $780 million in the first six months of the year, excluding exits.
This detailed analysis provides crucial insights into the current state of Africa’s tech ecosystem and the challenges it faces.
Funding Overview: A Dramatic Decline
The $780 million raised in H1 2024 represents a substantial 31% decrease compared to the second half of 2023 and a staggering 57% drop from the same period last year.
This sharp decline reflects a cautious approach by investors amid global economic uncertainties and market volatility. The report meticulously outlines every funding round that took place during this period, offering valuable insights into the financial landscape of Africa’s tech industry.
Funding Composition: Equity vs. Debt
An analysis of the funding composition reveals an interesting pattern in investor preferences. Two-thirds of the total capital raised came through equity investments, while the remaining third was obtained through debt financing.
Also Read: Startup funding in Africa – Q1 2024
This ratio underscores the continuing preference for equity over debt in the African startup ecosystem, despite the challenging fundraising environment. It suggests that investors are still willing to take on the higher risks associated with equity in exchange for potentially greater returns.
Geographic Concentration: The Big Four Dominance
Investment remains heavily concentrated in the “Big Four” countries – Nigeria, South Africa, Egypt, and Kenya – which collectively accounted for an impressive 80% of the total funding.
This concentration highlights the ongoing disparity in startup activity and investment across the continent, with other regions struggling to attract substantial funding.
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The dominance of these four nations underscores the need for targeted efforts to boost startup ecosystems in other African countries and promote a more balanced distribution of investment across the continent.
Sector Analysis: Emerging Trends and Persistent Favorites
Sector-wise, Transport & Logistics emerged as the leading recipient of funding during this period, indicating a shift in investor interest towards infrastructure and supply chain solutions. However, the Fintech sector, while not leading in total funding, saw the highest number of startups raising $1 million or more.
This trend suggests a maturing Fintech landscape with a higher number of companies reaching significant funding milestones.
The diversity in sector funding indicates a broadening interest from investors, though traditional industries like Fintech continue to draw significant attention. This trend highlights the potential for innovation and growth across various sectors in the African tech ecosystem.
Gender Disparity in Funding: A Persistent Challenge
Despite ongoing efforts to promote gender diversity in entrepreneurship, funding for female-founded and female-led startups remained disappointingly low. Only 15% of the total funding was directed towards female-founded ventures, and a mere 8% towards those led by women.
This persistent gender gap underscores the challenges faced by female entrepreneurs in securing investment and highlights the need for more targeted initiatives to support women in tech across Africa.
Looking Ahead: Challenges and Opportunities
The trends highlighted in this report provide a crucial snapshot of the current state of the African startup ecosystem. They reflect broader economic trends and underscore the need for targeted efforts to support diverse and emerging startup regions and sectors across the continent.
As the year progresses, stakeholders will be closely monitoring the second half of 2024 to see if it can reverse this downward trend and reignite investor interest in Africa’s innovative ventures. The potential for recovery and growth remains, particularly if global economic conditions improve and investor confidence returns.
The comprehensive data and analysis provided by The Big Deal serve as an essential resource for understanding and navigating the evolving landscape of tech funding in Africa. It offers valuable insights for entrepreneurs, investors, and policymakers alike, helping to shape strategies and decisions in this dynamic and challenging environment.
As the African tech ecosystem continues to evolve, overcoming these funding challenges will be crucial for unlocking the continent’s vast potential for innovation and economic growth. The coming months will be pivotal in determining whether this funding winter is a temporary setback or a sign of more profound shifts in the African tech landscape.
