TLDR:
- Venture funding for African startups declined by 31% in 2023, with a significant decrease in deals to 545 from 781 the previous year.
- Foreign investors are abandoning African economies struggling with high inflation and currency devaluation, leading to layoffs, business model changes, and closures.
Mirroring global market trends, a report by the African Private Capital Association indicated a 31% decline in venture funding for African startups in 2023, with the number of deals dropping to 545 from 781 in the previous year. Economic challenges such as high inflation and currency devaluation have prompted foreign investors to exit African markets, leading to job losses, business model shifts, and closures in the startup sector.
The report highlighted that the reduction in active investors in the region, particularly the withdrawal of North American investors, was a significant factor in the overall decline in investor numbers. West Africa, particularly Nigeria, remained a hotspot for venture capital activity in Africa, securing 26% of the continent’s total deal volume. The financial sector was the most prominent industry in terms of deals, followed by information technology and consumer discretionary sectors.
The association emphasized the need for indigenous capital allocators with a long-term commitment to the continent to support African startups. Amidst challenges, the report also recognized West Africa as the leading region for venture capital activity in Africa, with Nigeria standing out as the most vibrant market.
