Discover more from Africa: The Big Deal
🥶 Funding winter vs. Funding heatwave 🥵
A look at the extent of the start-up funding slowdown in Africa in the past 12 months
The so-called ‘funding winter’ - characterised by a YoY decline in funding raised by local start-ups - first bit the US and China in Q1 last year, before spreading to all continents except Africa in Q2. By Q3, it had put down roots everywhere. Which means we’re now a year into the African funding winter. Let’s have a look at what really happened then:
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…
Indeed, the total transaction value went down -37% YoY between the two periods. The dip is even more serious if we focus on equity deals (therefore removing exits, debt and grants) with a -62% YoY (÷2.6) plunge in equity funding raised. The number of equity deals also contracted though less dramatically (-35% YoY), a trend affecting smaller deals ($100k to $1m) and larger deals alike. While 800+ investors were involved in at least one transaction on the continent in the past 12 months, it represents a -25% YoY decrease compared to the previous period. This drop affected the number of investors involved in just one deal and repeat investors similarly.
Was this downturn accompanied by a change in where, what and who attracted funding? Well, not so much. The proportion of equity funding being deployed in the Big Four was stable YoY at 81%, which doesn’t mean some markets weren’t hit harder than others - but we’ll dig into this next week. Fintech continued to be the sector attracting most equity funding, though its lead eroded by 10 percentage points from 53% to 43%. 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). The vast majority of the funding (84%) continues to be concentrated in the hands of exclusively male-funded start-ups. While female CEOs’ relative share of the funding grew (from 2% to 7%), it did stagnate in absolute terms (~$140m). Look out for an updated gender analysis in the next few weeks.
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None of this analysis would be possible without the meticulous work of Maxime and Elodie who go through every single funding announcement with a fine comb, cross-check the data with that shared in confidence by investors directly, and produce monthly-updated numbers delivered on the first day of the month to hundreds of investors and entrepreneurs. If you’re not yet a subscriber to the database, check it out using this link for a sweet little discount. I have to warn you though: it’s addictive!