Funding for startups slows as Nigeria, others raise $542m in four months

Startups from Nigeria, South Africa, Kenya, Egypt and other parts of Africa in April, raised $75 million in 25 deals.

Africa: The Big Deal, in a report titled, ‘Funding raised in April 2024,’ the data insight firm, which tracks deals above $100,000 on the continent, revealed that the funding raised in April was 47 per cent down from the April 2023 inflows.

The report observed that April’s funding was the second-lowest fundraising month since 2021, with the lowest being March 2023 at $69 million.

The Big Deal said there were only 25 deals $100k+ and over publicised last month, the slowest monthly activity in terms of deal numbers since we started to track $100k+ deals in 2021,” the data insight firm said.

Further analysis of the report revealed that African startups raised $542 million across 153 deals worth $100k+ from January to April.

“This is considerably less than in the past three years. Year-on-Year, it represents a 22 per cent decrease in deal number and a 47 per cent drop in deal value,” Africa: The Big Deal noted.

According to the report, 85 per cent of these deals have gone to startups headquartered in one of the big four (30 percent to Nigeria and 29 per cent to Kenya).

Regarding sectors, 28 per cent of funding has gone to logistics and transport ventures, 25 per cent to fintech, and 14 per cent to energy. However, in terms of deal numbers, fintech continues to lead.

Africa: The Big Dea, disclosed that two new exits occurred in April 2024. Ghanaian health tech Rivia acquired SaaS provider Waffle, and Kenyan transport tech BuuPass acquired QuickBus to accelerate their expansion to Nigeria and South Africa.

The report observed that in April, two Series B funding rounds happened in Africa. Kenya-based SunCulture, which markets solar irrigation systems, raised $27.5 million, and Pula, a startup also based in Kenya, announced a $20 million round.

Head of Mobile for Development at GSMA and author of the report, Max Giacomelli, said the overall numbers aren’t encouraging.
“Defiant optimism is a common trait of many entrepreneurs and investors on the continent, so it doesn’t hurt to look on the bright side of data sometimes while we hope for better numbers in the coming months,” he added.

The slow funding may linger for long. Briter Bridges said funding for African startups declined by 54 per cent to $2.5 billion between January and October 2023 when compared to the same period in 2022, saying this could continue till the end of 2025 due to global economic challenges.

With Startup failure rates on the rise, a report by Weetracker put startup failure rate of 61.07 per cent, positioning Nigeria at the apex among the three prominent tech ecosystems and investment hubs in Africa.

The data indicated that only 39 per cent of startups in Nigeria manage to endure beyond their initial years of operation.

Despite challenges, Analysts said Nigeria remained a significant and attractive market for entrepreneurs and investors alike, signalling a dynamic landscape for innovative ventures.

More so, venture capitalists are also focusing on startups with clear signs of revenue growth or a path to profitability.
Investors are no longer interested in promises and are deciding which young companies are worth saving, leading to the shutdown of numerous startups.

This shift has emphasised the need for startups to demonstrate stronger viability and meet higher standards before receiving funding.

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