Appetite from local investors fuels surge in African startup funding

 

By Seth Onyango, bird story agency

 

Despite a steep downturn in startup funding in Africa since 2022, more African investors are channelling substantial investments into homegrown enterprises.

This is a marked departure from the previous years, when North American investors, particularly from the U.S., led the charge in startup funding across the continent.

Analysis from Africa: The Big Deal identified at least 619 unique investors who participated in deals of $100k or more within the continent, 35% of these investors were headquartered in Africa, making it the region with the most investors in African startups.

This shift came after a dramatic 47% year-on-year drop in the number of North American-based investors involved in the continent, according to the report.

“The fact that Africa was the continent where most investors in Africa were headquartered actually contrasts with the previous two years when the number one spot was held by North America (the U.S., really),” the analysis observed.

European investors remained significant, with a stable 25% representation, closely following African investors and indicating a potential rise in interest from this region as well.

When considering individual countries from around the world, however, the United States maintained its position as the single largest external investor in Africa.

South Africa stands out as the primary African country with active investors, highlighting its role as a significant hub for investment on the continent.

The top five countries hosting active investors has remained reasonably stable, with the United States, South Africa, Nigeria, the United Kingdom, and France (replacing Egypt) making the list.

Notably, France is the only country among the top 10 to see an increase in the number of investors involved in African deals from 2022 to 2023.

Despite common perceptions, China did not rank among the top 20 countries for disclosed investors active in African startups, suggesting either a lesser involvement than assumed or a lack of disclosure regarding Chinese investment activities.

Growing intra-African investment comes as the investment landscape on the continent becomes increasingly diverse, with more women and younger investors getting involved.

This diversification is expected to bring fresh perspectives and innovative approaches to funding, potentially leading to a more inclusive and dynamic startup ecosystem.

Female-led startups, for example, have begun to receive more attention and funding, reflecting a gradual shift towards gender parity in the investment space.

However, challenges remain. Despite the positive trends, many startups in Africa still face difficulties in accessing capital, particularly in the early stages of development.

bird story agency