African startup funding down 56% in H1 2024 as winter continues
TLDR
- African tech startups raised $530 million in the first half of 2024, marking a 56% decrease compared to 2023 due to global economic conditions.
- Q1 2024 saw only $310 million in funding, a 52.3% drop from Q1 2023's $650 million, indicating a downward investment trend in the sector.
- Funding for startups in H1 2024 was received by 117 companies, showing a slight decrease from the 131 funded in the same timeframe in 2023.
African tech startups raised $530 million in the first six months of 2024, a 56% decrease compared to the same period in 2023, according to Disrupt Africa data. This decline reflects the ongoing impact of the global economic climate on investment in the sector.
Hopes for an increase in investment in 2024 were dashed by a disappointing first quarter, with funding totaling just $310 million, down 52.3% from the $650 million raised in Q1 2023. This trend continued in the first half of 2024, with 117 startups receiving funding, slightly fewer than the 131 funded in the same period last year.
The annual halving of total investment has now persisted for two consecutive years, as both Q1 and H1 2023 experienced similar declines of just over 50%.
Key Takeaways
The exuberant venture capital (VC) landscape of 2022 gave way to a stark reality in 2023, with global funding plummeting by approximately half in the first half of the year. This dramatic shift coincided with interest rate hikes, which had a chilling effect on fundraising. For every 1% increase in interest rates, there was an alarming 3.2% decline in VC capital. This tightening environment not only reduced the pool of VC money available to startups but also made debt financing less viable due to higher borrowing costs. According to Disrupt Africa, 406 startups raised a combined total of $2.4 billion in 2023. These figures indicate a reset for African tech, as the global capital shortage began to impact the sector. The number of funded ventures decreased by 35.9% from 633 in 2022, while the total amount raised fell by 27.8% from $3.33 billion in 2022.
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