Africa Tech Startup Funding Resilient Amid Challenges
Imelda Mumbi, 13, holds her smartphone as she studies online using an application, at a common area ... More of a residential apartment next to her home at Riruta suburb in Nairobi . (Photo by TONY KARUMBA / AFP) (Photo by TONY KARUMBA/AFP via Getty Images)
As 2024 came to a close, a new milestone was reached in Africa's tech scene: two new unicorns were minted back-to-back. The Nigerian fintech Moniepoint and the South Africa-based TymeBank joined seven other African unicorns on the elite list of start-ups with a valuation exceeding $1 billion.
The December unicorn rush boosted what was otherwise a down year for Africa venture funding. One of the most widely watched reports noted a 25% drop in funding for the year, clocking in at $2.2 billion raised in equity, debt, and grants across the continent.
The report by Africa: the Big Deal, a consultancy that charts the continent's startup scene and tracks funding rounds, noted that the second half of the year ended stronger than the first, but the 2024 numbers were significantly lower than the nearly $4.6 billion raised in 2022.
Africa was not alone in funding woes. The story was similar across emerging markets venture funding in 2024. Magnitt, a data analytics firm, reported that startups in the Middle East, Africa, South East Asia, Turkey and Pakistan also experienced investment slumps, raising only $9.1 billion in the year. This marked a 41% decline from 2023.
Investors and entrepreneurs in Africa, however, are undeterred. They cite Africa's young, rapidly urbanizing, increasingly wired, fast-growing populations as ripe for mobile-based and tech solutions, ranging from banking to supply chains.
A young african business woman in her office over an illuminated city, checking her smart phone at ... More dusk.
'We are just at the beginning of the Africa tech growth story,' Lexi Novitske, the managing partner of Norrsken 22, an Africa-focused tech growth fund, says. 'There is huge untapped demand and significant improvement in talent across the ecosystem, with angel investment spurring that growth. We are also seeing rapid adoption in tech platforms. The world will see several big success stories coming soon."
The first month of 2025 'kicked off on a high note,' according to Africa: The Big Deal. According to their database, startups raised $289 million. This marks the second-best January for startup funding in Africa since at least 2019, according to the consultancy. All told, startups have raised $408 million this year through the end of February, they noted in a recent post. Favorite targets for startup funding include fintech companies or logistics and transport firms.
Investors cite companies like Lagos-based fintechs Flutterwave and Paystack as examples of African companies that attracted international attention through fast growth and increasing scale. Paystack, a payments company, was acquired by Stripe in 2020 for an estimated $200 million, and Flutterwave, the Nigerian digital payments company, is gearing up for an initial public offering (IPO). Its last funding round in 2022 valued the company at $3 billion.
Investors also cite the myriad challenges facing the continent, including physical and digital infrastructure gaps, as both an obstacle and an opportunity for entrepreneurs to solve problems.
Tunde Kara, founder of Vendease, saw both obstacle and opportunity in the fragmented landscape of Africa's nearly $1 trillion food industry. His firm deploys 'Buy Now, Pay Later' technologies to restaurants and food businesses that creates 'a ripple effect across the food economy,' Kara says.
A Kenya Airways employee controls an unmanned aerial vehicle (UAV) as it spreads fertilizer over a ... More tea farm at Kipkebe Tea Estate in Musereita on October 21, 2022. - The agricultural drone market is expected to grow in the coming years, with some reports suggesting it could reach 10.5 billion USD by 2028. (Photo by Patrick Meinhardt / AFP)
The Vendease platform streamlines procurement and operations for food businesses in Nigeria. It connects restaurants directly with suppliers, offers software for supply chain and inventory management, and provides financial services like credit access. Kara notes that the company has provided $90 million in credit funding that has supported 135,000 farmers and reduced food waste considerably.
The Food and Agriculture Organization (FAO) has noted that some 30-40% of food produced worldwide is lost due to inefficiencies in production and supply chains. Vendease tackles food loss while supporting farmers, restaurants and the broader food industry.
Nnamdi Emefo is solving for a different kind of challenge: locating sports talent in the continent. His firm, Afriskaut, uses AI and proprietary data to identify and showcase top African football talent. By processing match videos, it extracts key performance metrics, offering clubs, scouts, and agents comprehensive scouting tools.
DAKAR, SENEGAL - JANUARY 17: Children pose for a photo during a FIFA Grassroots schools program, on ... More January 17, 2019 in Dakar, Senegal. (Photo by Maja Hitij - FIFA/FIFA via Getty Images)
Nnamdi Emefo understands that he is playing a long game and that advances made by today's entrepreneurs will build a platform for future growth. 'I see today as pre-early days because a lot of the founders are building the infrastructure required to catapult their industry to the next level, and the next set of entrepreneurs and founders will build on the current foundations we are laying,' Emefo says.
Aubrey Hruby is an active investor, analyst and co-author of The Next Africa: An Emerging Continent Becomes a Global Powerhouse. Her firm, Tofino Capital, is bullish on Africa's creative industries economy that can 'either take advantage of the buying power of global consumers and also become part of the daily or weekly spend of millions of Africans on sports and entertainment.'
Hruby acknowledges the challenging environment. She pointed to large devaluations in Egypt and Nigeria as key factors contributing to the slowdown in venture investment. 'I expect the African market to recover slowly,' she says, 'but it will depend a lot on stabilization and recovery in Nigeria.' She also notes that companies 'are more realistic about valuations and re-prioritizing cash generating growth.'
A delivery man drives a transporter with an advertisement for Nigeria's e-commerce site Jumia in the ... More Plateau district of Abidjan on April 24, 2019. Jumia, the e-commerce site based in Nigeria, became on April 12, 2019 the first African start-up to make its debut on Wall Street. (Photo by ISSOUF SANOGO / AFP) (Photo by ISSOUF SANOGO/AFP via Getty Images)
Hruby also says that the drastic stock price fall in Jumia Technologies, the NYSE-listed African e-commerce player, has discouraged some investors that still wait to see strong exits in the African tech ecosystem. The Lagos-based e-commerce platform went public in New York in 2019 amid great hopes as one of the first African tech companies to list on the global exchange, but its share price performance has lagged considerably amid concerns over profitability, regulatory scrutiny, and market conditions. Still, its growth prospects remain strong and it turned a profit for the first time in 2023.
Novitske also acknowledges the challenges, saying that "Economic headwinds are real. Currency issues are real. We very much have to watch how our dollar-based investments are going to perform over time when spending power in dollars is eroding year on year. That has been a big issue in Nigeria."
Still, she says, 'there is a perception challenge. These companies need large amounts of capital to fuel scalable growth. International investors look at Africa as poor, corrupt, and lacking the right infrastructure. All of this has been marred by news stories, but in reality, there is a huge untapped market here, and there is tremendous growth coming online. These tech companies are doing it very responsibly, dealing with governments in a responsible way.'
'Payments have taken off. Digital identity is starting to work. For the first time, consumers have credit history and banking history," Novitske says. "International transactions are being liberalized, but we are still seeing a lot of friction and fragmentation around supply chains, trade, and manufacturing. That's where we see the next big wave of opportunity."
Tunde Kara adds: 'Despite Africa's vast opportunities, international investors often perceive the continent as high-risk due to factors like political instability and infrastructure deficits, but he notes that 'Africa's tech entrepreneurs are not just building businesses; they are creating solutions with transformative potential, from advancing healthcare to driving financial inclusion. This purpose-driven innovation, combined with one of the world's youngest and most energetic workforces, positions Africa as a rising hub for global innovation.'
Entrepreneurs across Africa are already rewriting the narrative, according to Ahunna Eziakonwa, the UNDP Africa Bureau Director. She notes, however, that 'investment remains scarce, regulations are inconsistent, and markets are frustratingly fragmented.'
Most investment in Africa tech startups go to the 'Big Four' - Nigeria, Kenya, South Africa, and Egypt - but new markets are 'emerging as hotbeds of innovation,' journalist Oluwatomisin Amokeoja writes. Ghana and Tanzania were the most successful 'non-Big Four' in 2024, and other notable rising innovation hubs include Senegal, Ivory Coast and Tunisia, Amokeoja notes.
According to most investors and analysts of the continent, immense promise exists amid the peril. Landry Signe, a senior fellow at the Brookings Institution and professor at the Thunderbird School of Management, notes that Africa will be home to 25% of the world's population by 2050 with $16 trillion in combined business and consumer spending.
In Signe's latest book, Realizing Africa's Growth Potential: A Journey to Prosperity, he describes Africa as 'the world's next growth market.' He points to rising middle classes, growing digitalization, accelerating regional integration, increasing diaspora investment, fast-growing trade links, more high-earning companies and improved infrastructure as key elements of Africa's coming rise.
'Africa's economic transformation and business potential,' he writes "are more substantial than many think."
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