In 2000, after the burst of the dot-com bubble in the United States, a man called Philip J. Kaplan launched a website called “F****d Company” (the name a parody of “Fast Company”, obviously), that listed troubled and/or failing US – mostly Silicon Valley – tech companies.
F****d Company these days exists only as a holding page, but the concept has now been re-established in Africa to chronicle the damage done to the continent’s burgeoning tech startup ecosystem by the global capital shortage.
Startup Graveyard (OK, we’ll figure out the team behind it after the holidays!), is documenting the number of African tech ventures that have shut up shop since the global crisis hit. And the list includes some serious names – in various shapes or forms, Sendy, Copia, MarketForce, and WhereIsMyTransport.
We wrote this article a year ago on the struggle faced by African tech startups. According to the ninth edition of the African Tech Startups Funding Report, released in January by Disrupt Africa, a total of 406 startups raised a combined total of US$2.4 billion over the course of 2023.
These figures meant African tech saw a reset of sorts, as the global capital shortage began to bite, and that reset has continued into 2024. Q1 and Q2, and therefore H1, posted declines of just over 50 per cent from the corresponding period in 2023, while Q3 was down 40 per cent on the corresponding period in 2023.
There are signs of recovery, however, with the rate of decline smaller than in the last two quarters, while the year-on-year fall is smaller too.
“Though still not a great quarter in the context of the last few years, Q3 2024 saw signs of improvement within the current funding winter as the decline in investment numbers slowed, both year-on-year and quarter-on-quarter. Big rounds for the likes of NALA, MNT-Halan and Paymob have lightened the general mood, but there were rounds at all stages,” said Tom Jackson, Disrupt Africa co-founder, at the time.
“Though clearly the African tech space is in a trough funding-wise, there are perhaps signs of light at the end of the tunnel, particularly with a number of new funds being announced in the last few weeks and months.”
Since then, there have been big rounds for the likes of Moniepoint and Yellow Card, and the general uptick in investment across the continent suggests we might be close to the end of the much-discussed “funding winter”.
Yet the African tech and VC space has been irrevocably changed by the global capital shortage, in some ways for the better. Now that the funding winter seems to be nearing its end, what does the continent’s VC space look like?
Zachariah George, managing partner of pan-African early-stage VC firm Launch Africa Ventures, told the latest episode of “the month in VC”, Disrupt Africa’s regular podcast on the African venture capital space, that though at times the going has been extremely tough, one positive is that the funding winter in Africa has not been as bad as it has in other markets.
“African startups, during the bull market from 2021 through to the beginning of 2023, did not have as high of a bump in valuations compared to in the US and and Europe, and to a certain degree Asia,” he said.
As international capital dried up, Africa-based investors are playing a greater role than ever before within the ecosystem, a sign of growing maturity.
“One of the important benchmarks is the fact that there’s been a much higher percentage of African family offices and African investors investing in tech startups in Africa, versus investors from the US, Europe, and Asia. I think for the very first time last year, if I’m not mistaken, the percentage of Africa-based funds investing in Series A and pre-Series A startups was higher than investors from outside of the continent, which is usually the hallmark of the start of a maturity cycle in the VC industry,” George said.
“You had more Africa-based VCs, on the ground, like ourselves, Enza Capital, LoftyInc, 4Di Capital, Knife Capital, et cetera, investing in African startups versus having to depend on US, European, and Asian VCs investing. So that was quite a big moment.”
We are also starting to see successful African founders give back by making investments in the space.
“You are now looking at the end of year seven, year eight, year nine of the first real tech success stories in Africa. So the founders of tech startups like Flutterwave, Paystack, Andela, Chipper Cash, Kuda, and OPay are now at a point where they’ve had either full or partial exits of their own equity in these companies, and they’re putting that money back to use either as angels, or LPs in funds, or setting up their own family offices,” said George.
Some positives, then, but the next edition of our annual funding report, tracking 2024, will still lodge a decline on previous years figures. But both numbers, and expert opinion, suggest we are over the worst, and 2025 will be a much better year.
