Funding in African startups fell by 37 per cent to $4.1bn in June 2023

Data from Africa: The Big Deal shows that in June 2023, total funding for the African startups sector decreased by 37% year over year to $4.1 billion.

According to information gleaned from the database on the African start-up ecosystem, funding decreased to $4.1 billion in June 2023 from $6.5 billion in the same month previous year.

The financing raised through equity deals decreased, decreasing to $2.1 billion (through 560 deals) from $5.6 billion (through 860 deals) in June 2022, showing that every metric in the ecosystem had fallen.

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Also, from 1,100 in the previous period, there were 800 fewer unique investors.

The data insight firm noted that the funding winter — characterised by a y-o-y decline in funding raised by local start-ups — first began in the US and China in Q1 2022, before spreading to all continents except Africa in Q2.

It said that by Q3, it had put down roots everywhere and it is now a year since Africa slid into the funding winter.

It said, “But before we compare the change of season between the past twelve months (July’22-June’23) and the previous period, it is worth noting that July’21-June’22 was in fact a heatwave: it was the consecutive 12-month period during which the ecosystem in Africa experienced the highest levels of funding activity both in total amount raised ($6.5bn) and total number of equity deals (860). It makes the funding winter all the more frosty.”

The firm explained that despite this, the proportion of equity funding being deployed in the Big Four (Nigeria, South Africa, Kenya, and Egypt) was stable y-o-y at 81 per cent.

It added, “This doesn’t mean some markets weren’t hit harder than others. Fintech continued to be the sector attracting the most equity funding, though its lead eroded by 10 percentage points from 53 per cent to 43 per cent.

“This can largely be attributed to the fact that there were no less than 7 fintech mega deals ($100m+) during the heatwave, versus only one in the past 12 months (MTN-Halan in February 2023).”