Africa’s startup market defied the global venture funding decline in H1 2022, doubling its total from the previous year to $3 billion. However, VCs tightened their purse strings later in the year, causing ticket sizes and deal closings to drop.
VCs anticipate that the funding slump in Africa will persist into 2023, leaving startups facing difficulty raising capital both for new and existing ventures.
“My 2023 prediction is that things will get worse before they get better — down rounds, layoffs, closures and bridge rounds will continue to increase in the African startup ecosystem.” Abel Boreto, Novastar Ventures
“The African startup ecosystem will continue to experience down rounds, layoffs, closures and bridge rounds in the coming years before things start to improve,” predicts Abel Boreto of Novastar Ventures.
“The global economic slowdown will continue into 2023, with inflationary pressures and tight monetary policy creating a judicious investment climate for African investors. This means startups on the continent will find fundraising difficult,” said Bruce Nsereko-Lule, General Partner at Seedstars Africa Ventures.
This year, the operating environment for startups is expected to worsen, leading to layoffs, scaling down of activities, and bridge/down rounds; continuing a trend from late 2022.
Mega-rounds ($100M+) were scarce in the second half of 2022: no deals signed, compared to six in the first six months (half of 2021’s record total). Source: The Big Deal database.
