TLDR:
- Investors in African startups are feeling optimistic about a return to more dealmaking.
- African tech hubs have learned lessons from the past couple of years on better investment structures.
Investors in African startups are starting to feel more positive about the tech sector on the continent. Despite a significant drop in investments in the first half of this year compared to last year, there are signs of macroeconomic stability in key African destinations for venture capital investment, such as Nigeria. This, coupled with the prospect of rate cuts by the US Federal Reserve, is boosting optimism in the funding ecosystem. Investors believe that a healthier ecosystem is emerging, with companies showing real growth and less hype.
Additionally, the recent funding crunch has provided necessary growth pains for the African tech sector. Lessons have been learned about the need for better investment structures to minimize the risk of startup closures and misdeeds. The next era of dealmaking is expected to be marked by a greater sensitivity to margins, with a focus on finding high-margin, low-capital intensity business models in Africa.
New funds are being formed to support entrepreneurs in Africa, with a sense of renewed optimism among investors. Innovate Africa, a Rwanda-based fund, is investing in early-stage startups tackling significant problems with the potential for tremendous change. Investors believe that while the past years saw record fundraising, there was an underestimation of the time it takes for new technology to transform local markets.
