After a period of big growth and lots of new ideas, Bendada.com, a popular tech-focused news site in Nigeria, has released its first “State of African Tech Funding Report 2023.” This report looks closely at what happened in the African tech world during 2023.
Benjamin Dada, who founded and runs Bendada.com, explains, “The money going into African startups has followed a pattern over the years. It started small about ten years ago, then shot up in 2021, peaked in 2022, and unfortunately slowed down in 2023. We predict this decline might continue into 2024 unless something changes.”
In 2023, African startups received $2 billion in investment, which is 43% less than the previous year, according to Bendada.com’s BD Funding Tracker.
Dada says, “After seeing a huge 200% increase in funding in 2021, we started keeping a close eye on the numbers. We believe tracking where money goes gives us a good view of how innovation and business are changing in Africa. But because other reports didn’t agree, we decided to make our own database, starting in 2022.”
Some important findings from the report include:
- How much money African startups got in total
- Where most of the funding went in Africa
- Which areas of tech were most popular
- Any layoffs or businesses closing down in 2023
- Predictions and up-and-coming startups for 2024
The report also shows that Nigeria, Egypt, Kenya, and South Africa were still the main places for investment in Africa. Fintech (financial technology) was the biggest sector getting investment in 2023, followed by clean technology, transportation, and online shopping.
This shows that African startups are focusing more on making profits and having solid business plans. Dada says, “We’re committed to giving honest and accurate news about African tech. Our ‘State of African Tech Funding’ report is proof of that. We want to help entrepreneurs, investors, workers, and policymakers understand and contribute to Africa’s changing tech scene.”
Bendada.com’s funding tracker gathers reliable data on investments in Africa, helping investors, startups, and news outlets around the world. They promise to keep highlighting the amazing innovations happening in Africa.
You can find the “State of African Tech Funding Report 2023” on Bendada.com’s website for download, which is a big step in understanding how funding is changing in Africa.
Following the release of BenDada’s Report, the StartupsVibes team decided to join the conversation and look into some of the questions people are asking.
What Led To This Downturn?
- VC funding in the African startup ecosystem has steadily declined in 2023, causing experts to worry about the future of the once fast-growing sector.
- With fewer investors willing to bet on the continent during the tech downturn, the funding crunch has triggered mass layoffs, slashed valuations, and the liquidation of several African startups.
- Recent news reports of mismanagement and fraud have impacted investor perception, leading to increased scrutiny and demand for credibility from local and global investors.
Editor’s Choice
The amount of money going to African tech startups went down in 2023, which is worrying for people starting new businesses and those who invest in them. In the last three months of 2023, investors only put $300 million into African startups. This was the third time in a row that funding went down. Compared to previous years, startups in Africa only got $1.3 billion in the first nine months of 2023. This is much less than the $3.3 billion and $2.9 billion they got in the same period in 2022 and 2021.
This drop in funding is part of a bigger problem happening worldwide, where tech companies are struggling. There are fewer jobs, less investment, and companies aren’t worth as much as they used to be.
In the past, startups could get a lot of money even if they didn’t have a product yet or many customers. But now, investors are being more careful. They want to make sure they don’t lose money, so they’re giving less money to startups and asking for more guarantees in return. This makes it harder for new businesses to get started.
If you are yet to see the video, Join us in this insightful video as we delve into the factors contributing to this decline, the impact it has on emerging businesses, and the potential strategies to navigate through these challenges.
Let’s shed some light on the end part of the video.
According to the International Monetary Fund (IMF), 4 policies have been listed as means to help navigate the current turmoil.
- Consolidating public finances and strengthening public financial management.
- Containing inflation.
- Allowing exchange rates to adjust, while mitigating the adverse effects on the economy.
- Ensuring important efforts to tackle climate change do not crowd out financing for basic needs like health and education.
Now, let’s break down each point with explanations and possible illustrations:
- Consolidating public finances and strengthening public financial management: This means that governments should focus on managing their money better and being more responsible with their spending. For example, they could reduce unnecessary expenses, cut down on corruption, and improve budget planning.
Illustration: Imagine a government implementing stricter budget controls and increasing transparency in financial transactions. This could lead to better allocation of resources and increased investor confidence in the country’s financial stability.
- Containing inflation: Inflation refers to the increase in prices of goods and services over time, reducing the purchasing power of money. To contain inflation, governments may implement policies such as controlling the money supply, regulating prices, and managing demand.Â
Illustration: If a country experiences high inflation, the prices of everyday items like groceries and fuel may skyrocket, making it difficult for people to afford basic necessities. Implementing measures to control inflation can help stabilize prices and maintain economic stability.
- Allowing exchange rates to adjust, while mitigating the adverse effects on the economy: Exchange rates determine the value of a country’s currency relative to other currencies. Allowing exchange rates to adjust means letting the currency’s value fluctuate based on market forces. This can help maintain a balance in international trade and investment. However, governments need to ensure that sudden fluctuations in exchange rates don’t harm the economy, especially by protecting against rapid depreciation or appreciation of the currency.Â
Illustration: If a country’s currency suddenly loses value compared to other currencies, it can make imports more expensive, leading to higher prices for imported goods. This could negatively impact businesses and consumers. Mitigating adverse effects could involve implementing measures to stabilize the currency or providing support to affected industries.
- Ensuring important efforts to tackle climate change do not crowd out financing for basic needs like health and education: This means that while addressing climate change is crucial, governments should not divert all their resources and attention away from other essential areas like healthcare and education. It’s about finding a balance between investing in environmental sustainability and meeting the basic needs of the population.Â
Illustration: A government might invest heavily in renewable energy projects to combat climate change. However, if this investment comes at the expense of funding for healthcare or education, it could negatively impact public health and education outcomes. Therefore, it’s essential to prioritize and allocate resources effectively across various sectors to ensure comprehensive development.
Examining the intricacies of each of the four outlined policies and their accompanying illustrations, it becomes apparent that Nigeria is entangled in the web of challenges posed by each. Consequently, urgent application of these policies is imperative if the nation aspires to nurture a fertile ground for startup funding this year 2024.
