African Tech VC Funding Sees 51% YoY Drop in Q1 2024

Venture capital funding within the African tech startup ecosystem has encountered a significant downturn, as indicated by a recent report from BD funding tracker, revealing a staggering 51% year-over-year decline in VC funding in Africa during the first quarter (Q1) of 2024.

This continued decline can be attributed in part to escalating interest rates and global geopolitical tensions, which have dampened investor confidence and slowed down startup funding activities.

During Q1 2024, startups across the continent secured a total of $369 million across 64 publicly announced deals. Equity funding, historically dominant, accounted for 67% of these deals, with debt funding making up 14.90% and undisclosed mixed deals.

The mobility sector emerged as the top recipient of Q1 2024 funding, capturing a dominant 31.17% share despite only six deals. Nigerian startup Moove played a pivotal role, securing $110 million, constituting 30% of the total Q1 funding for African startups through both equity and debt deals.

Other sectors secured more modest shares of Q1 2024 funding. Cleantech claimed 13% with eight deals, health tech followed with 10.89% across seven deals, and fintech secured 7.78% through 11 deals.

The “big four” markets in Africa—Nigeria, South Africa, Egypt, and Kenya—maintained their funding dominance, securing 91.22% of total regional funding in Q1 2024.

Early-stage funding dominated Q1 2024 in terms of the number of deals, with accelerators, pre-seed, and seed rounds comprising 27 deals worth a combined $38.5 million. However, this focus on early-stage ventures contrasts sharply with later stages—pre-Series A, Series A, and Series B—where only eight rounds secured $144.2 million.

The decline in funding within the African tech and startup ecosystem has negatively impacted the valuations of several companies, leading some to pursue consolidation and downsize their workforce. In 2023, approximately 15 African startups ceased operations, with a significant number citing difficulties in securing growth funding rounds as a primary reason.

As Q1 2024 came to a close, several startups in Nigeria faced capital constraints and were forced to shut down. Earlier this year, Cova, a Nigerian health tech startup aiming to provide a comprehensive asset management solution, ceased operations due to scalability challenges.

Similarly, Thepeer, a Nigeria-based API startup seeking to innovate digital payments for businesses, also closed its doors and returned capital to investors.