Venture capital funding in Africa’s tech ecosystem continues to show a downward trend, with startups raising only $779.7 million in the first half of 2024. This marks the lowest funding amount since 2020, as detailed in the latest edition of the State of Tech in Africa (SOTIA) report by TechCabal Insights. Notably, over a quarter of this funding came from non-equity sources such as debt deals and grants, allowing founders to retain more ownership of their companies.
Persistent Decline Amidst Cost-Cutting Measures
Shifts in Funding Sources and Stages
Debt deals emerged as a significant funding source, with founders securing approximately $254 million. Venture deals, however, remain the most common form of funding, predominantly directed towards early-stage startups. Pre-seed startups raised about $12.9 million across 16 rounds, while seed-stage startups garnered $66.2 million in 20 rounds. Interestingly, the highest venture deal funding—$155 million—was raised through just four Series-B rounds. In contrast, grants contributed the least, with only $12.7 million raised.
Geographic and Sectoral Distribution
Sector-wise, the logistics and transportation sector dethroned fintech as the leading recipient of venture capital, raising over $218 million. This is a significant shift from H1 2023, when fintech dominated with $863 million. The fintech sector raised $185 million in H1 2024, followed closely by the energy and water industry, which attracted approximately $132 million. The telecom, media, and entertainment industry experienced the most significant impact from the funding crunch, raising only $3.5 million, its lowest since 2021.
Insights from Other News Sources
Additional insights from Disrupt Africa and TechCrunch highlight the broader implications of these trends. Analysts point to a global economic slowdown and increased investor caution as contributing factors to the reduced funding. Moreover, the focus on sustainable and scalable business models has intensified, with investors prioritizing sectors that demonstrate clear paths to profitability and impact.
Conclusion
The ongoing decline in venture capital funding underscores the need for African tech startups to adapt and innovate continuously. While the landscape remains challenging, the emergence of new markets and sectors offers hope for a more diversified and resilient tech ecosystem.