A new report by ‘Africa: The Big Deal’ on startups across Africa has indicated that the entities raised a total of $2.9 billion in 2023, representing a 39% year-on-year decline when compared to the funds they raised in 2022.
According to the report, which monitors deals announced by startups on the continent last year, in 2022, African startups raised $4.8 billion.
The report, however, indicated that despite the decline, the result for African startups was better given the anxieties by experts about the drop the decline in funding rates across the continent in key sectors during the year.
The report showed that 500 start-ups raised at least $100,000 in Africa in 2023, compared with 821 in 2022, indicating a 39% year-on-year decline.
On the capital raise activities by the startups during the year, the research platform clarified: “Last year, startups in Africa raised at least $2.9 billion through deals $100k and above. That’s if we count all types of deals (equity, debt, grants, etc.), but exclude exits. For reference, we tracked 19 exits in 2023 worth over half a billion dollars, almost entirely thanks to two Tunisian success stories: InstaDeep’s acquisition by BioNTech and Expensya’s acquisition by Medius.
“Funding on the continent fell -39% YoY. In the context of a global slowdown in VC activity, this performance is better than most might have feared. 500 start-ups raised at least $100k in Africa in 2023, compared to 821 in 2022 (also -39% YoY). This therefore means that the average deal size has remained stable between 2022 and 2023, again a pretty encouraging fact given the global climate”, it added.
Apart from the total number, the report’s findings showed that many startups in Africa turned to debt to finance their growth, with the debt raised reaching $1.1 billion, representing a +47% growth YoY, while equity funding dipped by -57% during the year.
A further analysis of the report reflected that in 2022, start-ups in Africa had raised 19 cents of debt for every $1 of equity they’d secured while in 2023, this figures rose to 65 cents as debt made up 38% of all funding raised compared to the 16% in 2022.
