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Venture capital funding raised by African startups has decreased by 54% in the first half of 2023 compared to the same period of the previous year, the region’s leading startup data platform said, citing global monetary tightening.
Africa’s entrepreneurs have raised a total of nearly $950 million in the first six months of 2023 compared to almost $2 billion in the same period in 2022, according to a MAGNITT semi-annual report released on Tuesday.
The number of deals has fallen to 214 recording an annual 50 percent contraction from H1 2022.
“The ongoing sluggishness of the global economy amidst declining yet sticky inflation rates continued to reflect with a heavier impact on the VC space in Africa moving forward to 2023,” the report said.
The report showed that there has been a growing appetite for early-stage investment due to tighter liquidity. More than half the deals closed in Africa during the first half of the year went to round sizes that ranged between less than a thousand and $1 million, the report noted.
Like last year, the fintech industry maintained the lion’s share of the total funds, capturing over $540 million and dominating the continent’s top three deals. The energy and healthcare industries ranked second and third, attracting a total of $139 combined, the report said.
Egypt came first in terms of the amount of capital raised, thanks to the $260-million mega deal secured by the upscaling fintech MNT-Halan in February, which brought the country’s total funds to $305 million. South Africa came second with a total of $290 million. Although Nigeria attracted the largest number of deals, it ranked third in terms of funding with a total of $161 million, recording a 75-percent drop from the capital raised in H1 2022, MAGNITT said.
Since the beginning of the year, bank failures coupled with weak economic outlooks have jeopardized venture capital markets across the globe. The MAGNITT report showed that Africa and the Middle East were no exception to other emerging markets.
The capital raised by entrepreneurs from the Middle East, Africa, Pakistan and Turkey has contracted by 64 percent in the first six months of 2023, reaching nearly $1.9 billion compared to $5.255 billion in H1 2022, according to the same report.
“Q2 2023 encountered the slowest funding MEAPT since Q4 2020. It was the first quarter since then without any $ 100 million+ deals,” the report read.
(Reporting by Noha El Hennawy; editing by Brinda Darasha)
