As the global funding winter continues to blow harder, the third quarter of 2023 has painted a somber picture for the African startup ecosystem.
The recent quarterly report by Disrupt Africa revealed a stark fall in venture capital (VC) funding, adding to the challenges faced by African tech startups.
In Q3 2023, African tech startups managed to raise a total of $492,418,000, bringing the year-to-date total to $1.4 billion. While this may appear substantial at first glance, the contrast with the previous year is impossible to ignore.
This is because, during the same period in 2022, a total of $2.7 billion was raised – a 48% YoY decrease that can be attributed to the unrelenting global capital crunch, which casts a shadow over the continent's burgeoning startup sector.
Looking at the overall year, 633 African tech startups collectively raised a remarkable US$3,333,071,000 in 2022. This was a growth of 55.1% compared to the 564 tech startups in 2021, which secured US$2,148,517,500 in funding. Yet, 2023 seems to be echoing global investment trends, signalling a "reset" phase after a period of unprecedented growth.
The outlook for the overall year isn't the most reassuring either if the current trajectory persists. Taking into account the fact that the first three quarters of 2022 accounted for over 80% of the total annual investment, the calculation shows that the African tech startup ecosystem is poised for a debilitating 54% year-on-year funding decline in 2022.
This fall in VC funding during Q3 2023 isn't isolated, as it mirrors global trends in investment. But there is no doubt that the resilience and adaptability of African startups will be put to the test as it becomes increasingly challenging for them to secure the funding necessary for growth and innovation.