African fintech startup funding fell by one-third in an extremely difficult 2023, but the sector remains way out in front as the investor favourite within the wider African tech space.
According to the ninth edition of the African Tech Startups Funding Report, released last month by Disrupt Africa in partnership with Flourish Ventures, AAIC Investment, and Atlantica Ventures, a total of 406 startups raised a combined total of US$2.4 billion over the course of 2023.
After bucking global trends in a record-breaking 2022, African tech saw a reset of sorts in 2023, as the global capital shortage began to bite. The number of funded ventures, and the total funding raised, declined for the first time since 2016, though not as dramatically as many had feared.
The number of funded ventures was down 35.9 per cent on the 633 that raised in 2022, while the combined total of US$2.4 billion was down 27.8 per cent on the US$3.33 billion raised in 2022.
While Nigeria was knocked off its perch in the midst of Africa’s funding winter, fintech, the leading sub-sector of Africa’s tech startup ecosystem, took some serious knocks funding-wise but retained its commanding lead over other verticals.
The sector saw its total funded ventures fall 37.6 per cent to 128, the first such decline since Disrupt Africa records began, while total funding fell 33.4 per cent to US$963,549,000. In both cases fintech’s share of the funding market slightly declined – but only slightly.
Essentially, the fall in fintech funding mirrored that of the general market, meaning there were plenty of sectors that suffered more badly. Nine sectors saw larger percentage drops in total funding, including, in the case of e-commerce and retail-tech, its traditionally largest competitor, which saw the biggest decline of all at almost 80 per cent.
Only two sectors, ed-tech and, most notably, energy, raised larger amounts of funding in 2023 as opposed to 2023, with smaller sectors most damagingly hit at a time at which they had been growing the fastest. So, for all its year-on-year decline, fintech, backed up by a massively growing amount of investment in Africa’s energy startup sector, keeps the African tech scene more buoyant than many had predicted as 2023 ticked away.
