The gloomy global economy portends danger for startups, especially fintechs, according to ‘Africa: The Big Deal report. The report noted that in 2024 so far, start-up funding in Africa is not quite what it was in previous years, in line with a global context that remains quite gloomy.
According to it, one of the key reasons is the significant drop in investments in the Fintech space. It said Fintech only represents 22 per cent ($158 million) of the funding raised this year so far in Africa, while at the same time last year, it made up more than half of the total ($852 million out of $1.7 billion).
Consequently, Africa: The Big Deal said the sector that’s attracted the most funding in 2024 so far is not Fintech but Logistics & Transport (29 per cent, $215 million); and Energy & Water is a not-so-distant third (18 per cent, $132 million).
“But what’s particularly interesting is to look at the proportion of funding that is going to ventures that can be considered as ‘Climate Tech’. Climate Tech is not so much a ‘sector’ per se as it covers a wide range of use cases, so we instead track Climate Tech investments as an additional layer,” it noted.
According to the report, Climate Tech represented 45 per cent of the funding announced on the continent this year so far ($325 million), an all-time high since tracking these numbers started in 2019.
While Climate Tech funding has been growing in absolute numbers in the past five years ($340 million in 2019, $344 million in 2020, $613 million in 2021, $959 million in 2022 and $1.1 billion in 2023), the investment boom in 2021 and 2022 did not benefit this space as much as other (such as Fintech), resulting in a drop in its share of total investments: from 25 per cent in 2019 and 32 per cent in 2020 to 14 per cent in 2021 and 21 per cent in 2022.
This share started to pick up again in 2023 (36 per cent) and seems on track to grow again in 2024 (45 per cent so far), even though topping last year’s $1.1 billion invested in Climate Tech seems unlikely at this stage.
As earlier reported, startup funding witnessed a rebound in May, where African players raised fresh capital totalling $187 million. In April, the firm’s data showed that African startups raised $75 million, hence, the May figure showed a 149 per cent increase in funding for the continent’s startups.
According to the report, 64 ventures received at least $100,000 in funding, a very high number compared to previous months, while 17 startups raised at least $1 million.
Between January and May, an average of 38 startups raised at least $100,000 each month per the report.
‘Africa: The Big Deal’ informed that the total funding announced last month was split between four per cent in grants, 31 per cent in equity, and 65 per cent in debt.
The total debt funding for the month stood at $122 million and it includes the $51 million raised by M-KOPA and $50 million by Spiro.
According to the report, three exits made the news in May including Lesaka’s acquisition of Adumo for $85 million, Busbud’s acquisition of Ratality in South Africa, and the much-discussed acquisition of Brass by Paystack-led investors for an undisclosed amount.
The research firm disclosed that $729 million has been announced in funding excluding exits since the beginning of the year.
‘Africa: The Big Deal noted that the amount still lagged behind previous periods: $1.7 billion in January to March 2023; $2.7 billion in January to March 2022 and $1.1 billion in the same period in 2021.
“However, in terms of the number of ventures raising at least $1 million, 2024 so far compares rather well to some previous years: 90 vs. 95 in January to May 2023 and 91 in January to May 2021. 2022 was exceptional though with 200 ventures involved in over $1 million deals in January to May,” it said.
