The funding woes of startups have spilled into 2024 as 42 startups raised $85.6m in January 2024.
This is a lot smaller compared to what has been raised in recent years in the first month of the year, but the deal count remained higher than pre-2021 levels, Briter Bridges disclosed in an email update of funding activities for the month.
In 2023, funding in January exceeded $100m, in 2022 it was over $400m. One would need to go as far back as January 2017 for numbers close to what was raised in 2023, according to a chart in the email. It stated that most deals in a new year are typically carried over from the previous year, and the funding pattern in January reflected early-stage investments.
Commenting on the funding pattern, the data insight firm said, “Fintech leads the way in both funding volume and size. The sector received the most funding with 11 deals. 6 out of the 11 deals were raised by startups offering payment services.”
Kenya continues to attract the majority (45 per cent) of the funding on the continent. It highlighted, “Aside from Kenya, the other Big 4 countries make up the top 5 funded geographies. Ethiopia joins the Big 4 in January 2024 and secures the third position. This was largely driven by a single deal made by the agritech startup, Hatch Africa.”
Most of the deals in January ranged between $1000 – $1 million range. Investment Director, Novastar Ventures, Abel Boreto, “Based on the depressed January funding numbers. 2024 might be another challenging year for the African startup ecosystem.
“Companies in Africa will need to continue to radically reshape their business models and drive to profitability and sustainability faster or sooner in order to survive through the current ‘funding winter’.”
In 2023, startups on the continent raised $4bn, according to an earlier report from Briter Bridges. It was a 23.08 per cent decline from the $5.2bn they raised in 2022, Briter Bridges revealed.
In its report titled, ‘Africa 2023 Investment Report: Crisis or adjustment?’, the data intelligence firm argued the slowdown in funding is more of a reconfiguration rather than a crisis.
It said, “We may be observing a process of reconfiguration or adjustment, which comes as a consequence of the two cash-abundant years that followed Covid-19, during which valuations skyrocketed and the high liquidity meant that investors had to compete for ever more expensive deals.
“This process arguably created a generation of overpriced businesses which struggled to find an equally bullish investor market as soon as the tide turned and capital became less available and more expensive. The result? Many stagnated or were forced to downsize or shut down.”
Kenya ($806m) attracted the most funding in 2023, followed by Egypt ($675m), Nigeria ($575m), and South Africa ($565m).
2023 was a relatively bad year for startups when compared with other years and experts expect startups to get creative as the funding well continues to dry up.
In Briter Bridges’s investment report for 2023, an investor at Microtraction, Offiong Isyah, noted, “We are confident that the quality and pool of talent in Africa will continue to increase. As more African startups hit the local and regional growth ceiling along with the necessity to hedge against currency risks, it will drive startups to build products with the global market in mind.
Additionally, we are bullish on the startups enabling the creator’s economy and the future of work. We are convinced that AI and web# would provide a technological tailwind for African founders to build global businesses.”
Credit Gist New Today News in Newspaper Nigeria Headlines