Total investment into the African tech startup ecosystem fell by more than 50 per cent to US$1.1 billion in 2024 as the impacts of the global capital shortage continued to make themselves felt on the continent.
This is according to the 10th edition of the annual African Tech Startups Funding Report released by startup news and research portal Disrupt Africa, which is available free to all as part of an open-sourcing initiative in partnership with Art of Scale.
It wasn’t only the number of funded ventures and the amount of capital raised that declined in 2024. The number of active investors – individual or institutional – also fell, by 34.3 per cent to 346, from 527 in 2023. That itself had been down 46.6 per cent from 987 in 2022. That makes it two years of decline.
But why is this happening? Global factors, mostly, with the bursting of the bubble and falling valuations in developed markets like Silicon Valley having a knock-on effect for emerging markets like Africa. We’ve seen capital flight, and a lower risk appetite on behalf of investors – remember, Africa would fall into the risky bucket for most US or European investors. Local currency issues have also not helped.
The pain is being felt across the board. Each of the so-called “big four” of African tech – Nigeria, Egypt, Kenya and South Africa – raised significantly less funding than in 2023, but they retained their overall share of funding. Far fewer countries saw tech startups receive funding – just 17, compared to 26 in 2023 and 27 in 2024. Indeed, we haven’t seen fewer countries represented in these datasets since 2016.
Fintech once again proved by far and away the most popular sector for investors in African tech startups in 2024, yet it saw a second successive year of decline, and indeed declined at a greater rate. Yet other sectors performed just as badly, and in some cases worse, meaning the sector’s share of funding is broadly the same as in previous years.
The number of acquisitions declined alongside investment in 2024, as for the second year in a row the capital shortage took its toll on M&A activity. The number of such deals fell 20 per cent to 12.
But what is the meaning of these numbers?
“2024 was a brutal year for lots of startups and also lots of investors. There was continued correction in the market, and lots of investors were waiting to see what happened. We saw lots of high profile failures in Africa, whether its Copia in East Africa, or Gro Intelligence,” Abel Boreto, investment director at Novastar Ventures, told the latest episode of Disrupt Africa’s “The month in VC” podcast series.
Generally, it is important to note this is not a situation that is only affecting Africa, says Aaron Fu, head of venture at DCG.
“Africa is not alone in this. There has been a global downturn in venture deals. In February there was a 12-month low in terms of venture deals announced globally. So Africa is by no means the only recipient of this downturn. I think Latin America and Southeast Asia have all seen reductions in venture deals, so in context, Africa is not alone,” he said.
There were already signs late last year things were picking up, Boreto said.
“Towards the end of last year we started seeing a lot of positive news, whether its the emergence of Moniepoint or Tyme Bank as unicorns on the continent, the first time in two years we’ve seen unicorns coming through. These are very strong companies, profitable, expanding beyond their original markets. This year we’ve seen a lot of good deals announced, and we’re hoping that this year will be a positive one for the continent,” he said.
One positive is that it is encouraging those founders that are fighting on to run more sustainable businesses.
“We see more resilience in the founders that have decided to build, or to continue building. We see a much greater drive towards profitability, and a much greater drive towards tighter unit economics. Some of that is driven by “maybe I won’t get to raise again, maybe I need to build a profitable business”, but some of it is just “hey, let’s get back to basics, let’s not rely completely on venture capital for growth. Let’s just get back to building in a way that makes sense”,” said Fu.
“And I think that has been really magical to see, to see founders change their business model, to pivot, and to see new founders, despite this global shortage and capital downturn, still wanting to build. The founders that build when capital is scarce, are very often the founders that feel compelled to build no matter what, and those have tended to be the better founders that I’ve had the chance to back in the past. So I really don’t see this as a negative, and think there will be a lot of positives that come out of it as well.”
DCG remains bullish, and Fu says founders shouldn’t be worried.
“We chat with venture investors who are actively deploying into Africa all the time. A few funds have just closed, and I think founders shouldn’t be worried. Founders should just continue building. We are excited by venture in the region, for sure,” he said.
Boreto says there is a lot of dry powder on the continent, which should fuel a recovery.
“Lots of investors who raised capital over the last two or three years have been waiting to see what happens. I think a lot of them are now beginning to deploy, and some of the most high profile deals are very competitive nowadays. It feels as though the ecosystem has woken up from the slumber that we’ve been in over the last few years. So I’m hoping for a positive 2025, and hopefully we are past the market correction,” he said.
