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African tech startup funding declined by 39 per cent in 2023. This is according to a report titled 2023, <a href="https://thebigdeal.substack.com/p/2023?r=1o40sp&amp;utm_campaign=post&amp;utm_medium=email" target="_blank" rel="noopener noreferrer nofollow">the Year of Debt</a> by Africa the Big Deal, a venture company tracking funding and finncing into tech startups in Africa. According to the report, African tech startups managed to raise a total of $2.9 billion in funding.
This represents the numbers for deals whose values were $100,000 and above. They also cover all types of deals from equity to debt, grants etc., but exclude exits. The 2023 numbers were, however, a far cry from 2022 when tech startup funding hit %4.6 billion, its highest ever.
The report, however, noted that despite the decline in 2023 funding, the result was nonetheless better than what many had feared. This was because the year had experienced a slowdown in funding owing to a number of factors, chief of which is a global inflation.
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 In the context of a global slowdown in VC activity, this performance is actually better than most might have feared
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 <figure class="aligncenter size-full" data-beyondwords-marker="0b4df802-212b-4f16-a238-cb3dac37575c"><img width="1000" height="562" src="https://technext24.com/wp-content/uploads/2024/01/Africa-tech-funding.png" alt="African startup funding declined by 39% in 2023 as startups raised $2.9 billion" class="wp-image-224101">
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 Credit: Africa the Big Deal
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Per the report, debt financing appears to be gaining ground for startups across the continent as it was the only aspect of funding that witnessed growth in 2023. Of the $2.9 billion raised last year, $1.1 billion was debt financing. This represents an outstanding 47 per cent year-on-year increase.
“In 2022, start-ups in Africa had raised 19 cents of debt for every $1 of equity they’d secured. In 2023, this number went up to 65 cents, and debt made up 38% of all funding raised (vs. 16% in 2022),” the report noted.
Equity funding accounted for $1.7 billion of $2.9 billion raised, representing a significant 57 per cent year-on-year decline.
<h4 id="african-situation-reflects-global-tech-startup-funding-decline" data-beyondwords-marker="d2ee33e4-174f-44bb-a6dd-fb5a81ce6623">African situation reflects global tech startup funding decline</h4>
The decline in African tech startup funding is not an isolated occurrence as reports indicate a global slowdown in venture capitalist activities. In Q1 2023 for instance, Crunchbase revealed that tech startups were only able to attract $76 billion globally. This represented a mere 46.91 per cent of $162 billion raised in Q1 2022.
In Africa, the trend wasn’t very different as startups on th continent continued to suffer from a funding meltdown. By the first half of 2023, the entire continent has managed to raise just $1.43 billion in funding, a 53 per cent year on year decline. This was as venture capitalists focused their resources on late-stage startups. This led to a massive decline in funding into early-stage startups.
See also: <a href="https://technext24.com/2023/07/05/african-startups-raised-1-43bn-in-h1-23/" data-type="post" data-id="200270" rel="noopener noreferrer nofollow">African startups raised&nbsp;$1.43bn&nbsp;in H1 2023, a 53% YoY decline</a>
<figure class="wp-block-image size-large" data-beyondwords-marker="d9f0eb9b-8b1c-4138-b4e8-dc2149c8e2d9"><img width="1024" height="666" src="https://technext24.com/wp-content/uploads/2021/12/funding-a-startup-foundr-blog-1024x666.jpg" alt="" class="wp-image-132981" srcset="https://technext24.com/wp-content/uploads/2021/12/funding-a-startup-foundr-blog-1024x666.jpg 1024w, https://technext24.com/wp-content/uploads/2021/12/funding-a-startup-foundr-blog-300x195.jpg 300w, https://technext24.com/wp-content/uploads/2021/12/funding-a-startup-foundr-blog-768x499.jpg 768w, https://technext24.com/wp-content/uploads/2021/12/funding-a-startup-foundr-blog-230x150.jpg 230w, https://technext24.com/wp-content/uploads/2021/12/funding-a-startup-foundr-blog-260x170.jpg 260w, https://technext24.com/wp-content/uploads/2021/12/funding-a-startup-foundr-blog-380x247.jpg 380w, https://technext24.com/wp-content/uploads/2021/12/funding-a-startup-foundr-blog-550x358.jpg 550w, https://technext24.com/wp-content/uploads/2021/12/funding-a-startup-foundr-blog-800x520.jpg 800w, https://technext24.com/wp-content/uploads/2021/12/funding-a-startup-foundr-blog-1160x754.jpg 1160w, https://technext24.com/wp-content/uploads/2021/12/funding-a-startup-foundr-blog-460x300.jpg 460w, https://technext24.com/wp-content/uploads/2021/12/funding-a-startup-foundr-blog-760x494.jpg 760w, https://technext24.com/wp-content/uploads/2021/12/funding-a-startup-foundr-blog-1100x715.jpg 1100w, https://technext24.com/wp-content/uploads/2021/12/funding-a-startup-foundr-blog-600x390.jpg 600w, https://technext24.com/wp-content/uploads/2021/12/funding-a-startup-foundr-blog.jpg 1200w" sizes="(max-width: 1024px) 100vw, 1024px">
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According to Africa the Big deal report, 500 start-ups raised at least $100k in Africa in 2023. This represented a 39 per cent year-on-year decline compared to 821 startups in 2022.
Several factors affectig global tech startup funding include the volatility caused by the ongoing Russia-Ukraine war which has made investors wary, hike in interst rates by central banks across the globe, the aforementioned global inflation predicted for 2023 and driven by factors like surging fuel prices and reduced consumer demand, and a decline in tech stock globally which has naturally made investors risk-averse.
The global funding winter is taking its toll on startups across the continent. asides the many early-stage startups dying in their infancy, other matured ones like Ghanaian fintech, Dash, Kenyan logistics startup, Sendy, South Africa’s Where Is my Transport, and Nigeria’s 54Gene all bit the dust in 2023.
<div class="wp-block-image">
 <figure class="aligncenter size-full" data-beyondwords-marker="e4c2cd7f-73ca-4fe1-ba77-38b3a59720d9"><img width="700" height="467" src="https://technext24.com/wp-content/uploads/2022/10/image-44.png" alt="Dr. Abasi Ene-Obong" class="wp-image-161770">
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 Nigeria’s 54gene is one of several African startups to close shop
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While Crunchbase believes this dip in funding for venture investors implies that the current startup investing downturn may not turn course anytime soon, it is interesting to note that a number of Africa-focused funds are trying to address the gap, especially for early-stage tech startup funding.
Norrsken22, a tech growth equity fund, recently announced that it has closed its first African technology growth fund at $205m, surpassing its target of $200m.&nbsp;The investment company disclosed that it received strong support from unicorn founders and institutional investors to address a significant gap in growth-stage tech funding in Africa.
According to&nbsp;Lexi Novitske, Managing Partner at Norrsken22 who spoke to Technext, African tech funding has dropped in the past couple of quarters. She said:
“With the close of our fund exceeding our $200 million target we are excited to be able to catalyze the growth of Africa’s strongest tech companies.”
See also: <a href="https://technext24.com/2023/10/25/lexi-novitske-african-crypto-funding/" data-type="post" data-id="219123" rel="noopener noreferrer nofollow">Renowned Venture Capitalist, Lexi Novitske says African crypto startups may not need VC funding to grow</a>

African tech startups raised $2.9 billion in 2023 as funding declined by 39% YOY

Technext.ng

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