According to a curated funding database, African startups raised $3.4 billion in funding in 2023. However, TechCabal defines funding differently and believes that African startups actually raised $3.2 billion. This represents a decline compared to previous years and is the lowest funding for African startups since 2020. The decline in funding is part of a worldwide trend, as global tech funding has been steadily declining since January 2022.
Despite the decline, there is still hope for the African tech ecosystem. The decline in funding can push companies towards sustainable growth and innovation. It is also worth noting that funding in the energy or cleantech sector has been strong, with significant capital raised during certain months in 2023. The Big 4 African countries (Nigeria, Egypt, Kenya, and South Africa) raised a total of $2.37 billion, with Kenya leading the way with $756.2 million.
In terms of VC investment, there were several exciting closes and new funds established in 2023. Partech Africa closed its $263 million Africa Fund II, while Knife Capital closed its $50 million growth fund. Specialized climate funds also emerged, including Novastar’s $200 million Africa People + Planet Fund. Established VCs also doubled down on their investments during the year. Overall, while there was a decline in investment in VC firms, investment levels remain significantly higher than pre-pandemic levels.
Despite the decline in funding, the African VC ecosystem is poised for continued growth, with more investors coming in and more startups emerging.
