In 2023, venture capital funding has fallen considerably all over the world, and while there was a ton of optimism that the African tech economy would avoid too much harm, according to reports by Disrupt Africa, African Tech Startups had raised US $649,303,000 by Q1 2023, a total of US $1.19 billion by H1 2023, and further raised US $492,418,000 in Q3 2023, taking the total for the first nine months of the year to US $1.4 billion, down 48% on the corresponding period in 2022. Even so, 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. But the continent still has a long way to go as specifically, the African Tech Industry confronts a number of obstacles.

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. 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%.

Indeed, organizations riding on venture capital funding are making remarkable progress in the startup scene. Tracing back to mid 2023,  Max Cuvellier, the founder of the startup deal database Africa The Big Deal, in a feature by African Business, confirms that May 2023 was the best May the ecosystem has ever had in terms of funding raised. “Three companies, namely MNT-Halan, M-Kopa, and Sun King, represent nearly half of all the funding raised on the continent in 2023 so far. And this percentage rises to 58% if we add Planet42 and TymeBank to the list.” 

Shining a spotlight on other firms that are making good on use of Venture Capital Funding, at the start of the year, Gebeya, Ethiopia-based, SaaS-enabled, pan-African talent marketplace, announced an undisclosed pre-Series A investment from a Japanese VC firm to drive its ongoing expansion. The company has raised various rounds of capital since being founded six years ago, including a US$2 million back in 2020 that made up part of a wider US$4 million seed round, and then banked an undisclosed pre-Series A from Inclusion Japan (ICJ). Gebeya has since used the funding to evolve from being a simple two-sided tech talent marketplace into being a provisioner of marketplaces under a “Marketplace-as-a-Service” model. Looking at expansion, Gebeya has also introduced two new products into the market – G Staffing that streamlines recruitment by offering a simple platform to post jobs, track candidates and vet them, and G Five, an AI-powered engine that identifies the top 5 qualified candidates to match the recruiter’s hiring needs.

Crossing over to the immediate south of Ethiopia, Kenya’s BuuPass is continuously breaking the glass ceiling in the digital mobility sector. The company, which was founded in Kenya seven years ago, plans to first scale in Kenya and Uganda, before exploring other markets, and actively looks to promote order in the highly fragmented sector by helping operators to digitize their operations. Earlier this year, BuuPass was backed by a $1.3 million pre-seed funding it raised from various investors. With a primary focus on using the funding to invest in growth activities as well as increase market share in East Africa with a focus on Kenya and Uganda, BuuPass has since then kickstarted operations in Uganda, and introduced an innovative move to track parcels, adding to the company’s recent advancements. Ahead of the upcoming holiday season, they have also onboarded Mash Poa to their list of bus operators, which makes travels to Mombasa, a favourite holiday destination for many Kenyans,  better and safer.

Over to the west of Africa, Wellahealth in Nigeria is making headway when it comes to challenging the narrative around health care in Africa. In September 2023, Wellahealth was announced among 29 startups to receive an equity-free grant of $50,000 from i3, a Pan-African Initiative focusing on the healthcare supply chain sector, consequently, closing its last funding round. Backed by the Bill and Melinda Gates Foundation, Wellahealth falls amongst the second cohort of healthcare supply chain startups, the i3 program now being in its second year. In June 2023, WellaHealth also announced initiating the Healthsend Africa brand, a subsidiary of WellaHealth aimed at enabling Nigerians abroad to #SendGoodHealthHome. Fastforward to October 2023, the organization has expanded this groundbreaking product, Healthsend Africa, into Kenya. This strategic move marks a significant milestone for the company as it continues its mission to make quality healthcare accessible and affordable to people in Africa and beyond.

Even while companies riding on Venture Capital Funding continue making waves in the startup scene, 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. 

As we think of what The State of Venture Capital Funding in Africa in 2024 will look like, startups need to figure out the unknowns that will shape 2024. While predictions and trends are great pointers on what to expect, startup founders need to ask themselves the tough questions ahead of the incoming year. Beyond funding, most venture capital firms and angel investors want to be involved with startups creating impact. According to African Business Angel Network (ABAN), the largest pan-African organization of Angel investors in Africa, last year, startups on the continent raised a disclosed amount of $ 5 billion out of which $400,000 million was a direct contribution from local business angels. It is real and it is happening. African Business angels are playing an important role in the African startup ecosystem. 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, while also having the ability to scale rapidly.