African startups raised $1.43bn in H1 2023, a 53% YoY decline

African startups raised $1.43 billion in H1 2023 159 deals, 53% less than in H1 2022, which was $3.1 billion, according to a report.

The funding numbers in June 2023 alone dropped 70% to $126.9 million from $426.2 million in June 2022. This is also a significant drop from May 2023 which recorded $645 million – when we said you should not buy the flowers yet.

Egypt recorded the most disclosed deals – $442.55 million, followed by Kenya – $344.30 million, South Africa – $329.55 million and Nigeria – $166.45 million.

Together, the ‘Big Four’ make up 86% of the total funding in H1 2023.

Fintech continues to lead the pack

Fintech is the most funded sector, raking in 71% of all funding – $1.02 billion.

Per a report by Techpoint, lending startups take the lead, receiving 30.4% of the funding for the sector. Payments (16%) and Insurtech (8.9%) make up the top three. Furthermore, fintech startups are increasingly favouring debt for their capital needs, with 16% opting for debt.

Healthcare follows fintech with a significant gap – $70.24 million. E-commerce follows with $62.36 million raised. Blockchain startups come in fourth with $50 million.

Top raises by African startups in H1 2023

• MNT-Halan ($400 million)
• M-Kopa ($200 million debt + $55 million equity)
• Sun King ($130 million)
• Planet42 ($100 million equity and debt funding)
• TymeBank ($78 million pre-Series C)
• Victory Farms ($35 million)
• Lulalend’s ($35 million)
• Peach Payments ($31 million Series A)

The Techpoint report also looks at the funding raised through the number of founders. For context, 65.7% of startups that have raised money ($937 million) this half year have two founders, an indication that startups with two founders are more likely to raise funds.

This could be due to several reasons, including decision-making which tends to be faster and more efficient compared to larger founding teams.

Besides that, communication and alignment become more challenging as the number of founders increases. It is generally easier to maintain clear communication channels, synchronise goals, and align the vision with just two founders.

Also, establishing a strong and effective relationship between founders and investors is vital. With a smaller founding team, each founder can develop a deeper connection with investors, allowing for more personal interactions, frequent updates, and a better understanding of the startup’s progress. This relationship-building can contribute to stronger investor confidence and support.

Meanwhile, startups with three founders also raised significant funds – $419.23 million, but the startups with one founder or up to six founders seem to have roadblocks.

Will H2’23 be better?

Tech funding predictions for African startups in 2023 varied, but most experts agreed that there would be a slowdown from the record-breaking levels seen in 2021/22. Some factors cited for this slowdown included the global economic downturn and rising inflation.

Predictions for 2023:

• The total funding to be raised by African startups would decline from the $4.8 billion raised across 1,000 deals Africa: The Big Deal reported.
• The number of mega-rounds (deals of $100 million or more) would also decline.
• There would be a greater focus on later-stage funding, as investors seek to back more mature startups with proven track records.
• The ‘market correction scheme’ is ongoing and investors may be more reserved than ever.

However, there were also some reasons to be optimistic about tech funding in Africa in 2023, notwithstanding a significant slowdown in H1 2023.

The continent’s tech ecosystem has continued to grow, with more experienced founders and investors emerging. There is also renewed interest from both local and international investors in African tech startups.

Generally, it is difficult to predict if 2023 will end far better than 2022, but it is clear that the African tech ecosystem has experienced tremendous growth in recent years

Besides, it is just half-year.