Kenyan startups have emerged as the top recipients of funding in Africa for the first half of 2024, raising an impressive $200 million from January to June. This surge in capital inflow marks a continuation of the upward trend that began in 2023, positioning Kenya as a hub for innovation and entrepreneurship despite the backdrop of political unrest in the East African nation.
According to Intelpoint, Kenyan startups not only secured the highest amount of funding but also represented 17.9% of the startups that received investment, trailing only Egypt in startup representation. This sustained momentum highlights the increasing investor confidence in Kenyan startups and solidifies the country’s leading position in Africa’s startup ecosystem.
“Kenya has good fundamentals currently and access to East African communities which is good for scaling,” noted Oke Ekpagha, Senior Investment Analyst at Oui Capital. “When you compare the regional blocks, you’ll find a more integrated region in the East. With this, there’s a possibility of building a sticky and highly scalable product compared to the West African region,” she added.
Drivers of Funding Growth
Nieros Oyegun Soerensen, Partner and Chief Operating Officer at Verod Capital, attributes the significant growth in funding for Kenyan startups to an increase in debt funding, particularly in the energy sector. Large deals have also skewed the data, with notable examples including M-Kopa and Spiro, which collectively raised $101 million in debt funding.
Beyond Kenya, the top funding destinations remained consistent, with Nigeria, Egypt, and South Africa completing the top four spots. Together, these countries raised a combined total of $488 million.
Decline in Overall African Startup Funding
Despite the successes of Kenyan startups, overall funding for African startups has seen a significant decline, falling 61% year-on-year. By the end of June 2024, African startups had raised $581 million, compared to $1.47 billion during the same period last year. March stood out as a particularly notable month, largely due to Moove’s $100 million funding round.
Shift in Investment Trends
There is a noticeable shift in investment trends, with later-stage investing becoming more attractive. Historically, early-stage startups have attracted the bulk of investment, but this trend is slowing. Series B and Series A rounds accounted for 33% of the funding raised in the first half of 2024. Startups such as DXwand, Roam, RemotePass, BRKZ, Youverify, Pula, and Sunculture are among those that secured Series A and B funding.
Ekpagha explains that this shift is driven by changing investor demands. Previously, rapid growth was prioritized even at the expense of profitability. Now, investors require proof of positive unit economics in the early stages. “Later-stage startups have larger funding needs because of the stage of their development and the scale of the growth they’re trying to access. It’s only natural they’ll receive the bulk of the funding, especially in the current climate. With growth stage companies, there’s more assurance of their growth since they have weathered more storms.”
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Spotlight on Remotelli
One notable startup in the early-stage funding landscape is Remotelli, founded by British-Ghanaian entrepreneur Samuel Brooksworth. Remotelli aims to create jobs for a million youths across Africa. In February, the startup raised $314,824 in a pre-seed round led by Bayer Leverkusen right-back Jeremie Frimpong.
Remotelli operates with a talent pool of over 7,000 professionals across various fields, including marketing, finance, graphic design, software development, customer service, and sales. For as low as $642, organizations can hire talent through Remotelli within 14 days. Despite its ambitious goals, Remotelli has faced challenges, including a modest job placement track record and the high operational costs associated with providing office space for its talent.
Mobility Startups Lead the Way
While fintech has traditionally dominated the African startup funding landscape, mobility startups are now taking the lead. In the first half of 2024, mobility startups raised $147 million, surpassing fintech’s $142.5 million. This shift was driven by significant investments in startups like Moove, which secured $100 million in a Series B round, as well as Rwanda-based EV player Ampersand and South African car subscription startup Planet42.
The Power of Co-Founders
Startups with at least two founders continue to attract the majority of capital, securing 72% of the funding. The synergy and diverse skill sets offered by multi-founder teams are compelling factors for investors, who perceive such teams as better equipped to navigate the complexities of scaling a startup.
Soerensen advises founders to reassess their funding requirements and secure sufficient capital to avoid relying heavily on bridge funding. “Given the extended time from seed to Series A to Series B on the continent compared to other emerging markets, companies must be prepared for a longer development cycle. Founders should focus on achieving milestones conservatively and strategically to attract necessary funding,” she warns.
Conclusion
Kenya’s leading position in African startup funding highlights the country’s strong fundamentals and integrated regional market, making it an attractive destination for investors. Despite the overall decline in funding across the continent, the shift towards later-stage investments and the rise of mobility startups indicate evolving investor preferences and market dynamics. As African startups navigate these changes, the emphasis on building sustainable, scalable businesses with positive unit economics will be crucial for their long-term success.
