The African crypto startup ecosystem has faced its fair share of challenges in the past year. Affected by negative impacts from outside as well as internal issues, the industry has been forced to deal with layoffs, ‘restructuring’, salary reductions as well as outright shutdowns.
Another major concern is the decline in funding. At the peak of the 2021 bull run, huge sums of funds were raised by African native startups to catalyze the growth of the nascent crypto industry.
But due to many factors, funds have dried up and revenues are not being made. These and more are some of the reasons why these startups have had a difficult time.
Related post: African crypto payment startup, Lazerpay shuts down due to lack of funds
We had a conversation with a renowned venture capitalist, Lexi Novitske. As an investor in the African tech scene since its days of burgeoning a decade ago, Lexi has many to unpack on the causes of some of these problems and ways to improve the ecosystem.
Lexi Novitske
Lexi Novitske, General Partner at Norrsken22, an African tech growth fund, moved to Nigeria 11 years ago when the tech space was at its nascent stage.
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Even though there was not so much venture capital available, she saw an opportunity to catalyze the growth of African tech startups and got into the space.
Although the investment company that she works for doesn’t invest in crypto startups, Lexi Novitske believes that Africa is the market with an incredible amount of use-cases for crypto-related companies to solve problems.
Utilities such as digital assets as a storage of value, cross-border transactions and others play huge roles, in Lexi Novitske’s opinion.
She describes the journey of African crypto startups in the past four years as ‘volatile.’ Despite the drop in crypto prices and the prevalent fraud cases on the international stage, crypto companies with solid foundations are still standing strong. While she thinks venture capitalists have a role to play in catalyzing the growth of crypto startups, she also thinks that:
“Crypto business models can run very lean, at a very low rate and ultimately might not need VC to continue growth.”
Lexi Novitske.
Future of Crypto VC
There has been a decline in the amount invested in African crypto companies in the past year. With foreign funds no longer coming in and revenue generation proving difficult, crypto startups continue to struggle.
Commenting on whether these startups have justified the amount of investment and trust vested in them over the years, Lexi Novitske says we can’t group them all in a single bracket.
“There are some that have certainly justified it and provided huge value to their users, very strong companies. And there are others that are not so focused on long term value creation.,” Lexi Novitske says.
Additionally, she thinks regulators need to protect consumers but at the same time build an environment that is supportive of new business models that provide valuable financial access to the population.
“I think regulation needs to be more transparent and also straightforward, and supportive of some of these companies that want to build viable solutions for fostering financial inclusion across the continent.”
Although she is not investing in any crypto startup at the moment, Lexi Novitske is thrilled by the prospects of crypto startups leveraging Stablecoins to enable cross-border transactions as the funding winter persists.
“In reality we have a long way to go in educating people about the risk of investing in crypto and building value.” – She added.
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