Africa’s economy continues to showcase remarkable growth potential, with a projected average gross domestic product (GDP) growth of approximately 4% in 2023 and 2024. Despite these promising strides, the African tech industry confronts a number of difficulties.

One prominent hurdle is the limited access to adequate financing, particularly those in the early phases of development– a risk-averse culture often leaves startups in search of financial backing. Nevertheless, venture capital, serving as an important source of funding has been instrumental in supporting entrepreneurs, fostering innovations and fast-tracking economic development in Africa. Gullit VC, for instance, provides an early-stage fund with a focus on Tech in Africa, offering mentorship and coaching and capital and resource deployment. To ensure that the inequality of funds distribution does not hinder the growth potential of startups outside focal points for investment, Gullit also pioneers emerging markets, investing early in developing economies and industries across the African continent. Interestingly, the ‘big four’ countries have raised more than $24 billion in funding, many of which owe their success to venture capital investments.

According to Venture Capital in Africa Report, at least 157 unique companies were backed by venture capital investors and the median venture capital deal size stood at $2.0 million, while the median venture debt deal size reached $5.6 million in 2022. Remarkably, in the same year,  Africa funding grew by 8% to $6.5B, through 764 rounds in spite of the global fall of VC funding by 35%.

Despite these numbers, venture capital firms face challenges peculiar to the African climate, ranging from market instability, regulatory and legal uncertainties, supply chain disruptions, currency volatility and unprecedented inflationary pressure. Nonetheless, it’s not all gloom. The continent’s diverse markets provide untapped markets in different industries and as consumer demand for digital services, e-commerce, fintech, and other solutions increases, there is a corresponding demand for startups that can effectively address these local needs and have the ability to scale rapidly.

Although fintech remains the most funded industry, attracting 42% of venture capital deal value, funding is also flowing into other industries.. For example, WellaHealth, a healthcare technology company is providing access to quality health service for lower class and middle class Nigerians through micro insurance plans. Buupass, a player in the mobility industry is digitising the transport industry by bridging the gap between the transport operators and phone users in Sub Saharan Africa. The  growing number of innovative solutions and startups, as well as the creation of unicorns, underscores Africa’s rising pool of high-potential ventures, attracting additional venture capital interest. Meanwhile, as later-stage funding rounds continue to attract significant capital there is a growing emphasis on early-stage investments. Venture capital firms like Guillit VC supporting startups from their inception, offering guidance and contributing to their long-term success and growth.

Speaking on the trends for venture capital in Africa, Hiruy Amanuel, Managing Director at Gullit VC said, “ At Gullit VC, we recognize that the African tech ecosystem is a dynamic hub of innovation and growth. As an advocate of the African Tech landscape, our venture capital role goes beyond funding; we’re dedicated to providing mentorship and tailored solutions to address the challenges that African startups face. Focused on early-stage tech ventures across Africa, we’re committed to nurturing solutions, fostering growth, and driving the continent’s progress.”

The African tech ecosystem is a maturing one. As local players gain prominence, and an enabling environment is fostered, venture capital in Africa will continue to drive economic growth, technological progress, and positive social change.

Content retrieved from: https://societynow.ng/details-as-venture-capital-grow-africa-tech-funding-to-6-5b/.