- Despite a challenging economic climate, cleantech and internet connectivity sectors lead the way, with Kenya spearheading investment activity.
- Debt funding, often overshadowed by venture capital, played a dominant role in terms of volume, with transactions totaling over $26 million for November alone.
- The dual reliance on debt and equity highlights the adaptability of African startups in securing resources to fuel their growth.
As 2024 winds down, the African startup ecosystem finds itself in a less-than-rosy funding environment. According to data from startup funding tracker Briter Bridges, over 580 startups in over 30 African markets secured $1.9 billion through more than 670 deals that were disclosed this year.
This marks a noticeable decline in both funding volume and deal count compared to 2023, a scenario that is attributable to global economic challenges that have seen the tightening of the purse strings of investors.
Why African startups faced funding dip in 2024
According to Briter Bridges, the funding landscape across the continent shifted significantly in 2024, with African startups struggling to match last year’s capital inflows.
Global economic downturns and heightened scrutiny in investment decisions have created a challenging climate for entrepreneurs. As 2024 enters its final month, it’s evident that total funding flows will fall short of 2023 levels, underscoring the vulnerability of Africa’s burgeoning innovation ecosystem to global financial pressures.
Cleantech shines amid the gloom
Despite the downturn, the cleantech industry emerged as a bright spot, drawing significant investment. Companies such as Hydrobox, Qara, Sprout International, and Green Africa collectively raised $15 million through a mix of equity, debt, and awards.
Notable investors, including FMO and the EDFI Electrification Financing Initiative (ElectriFI), backed these ventures, reflecting a growing appetite for sustainable energy solutions across the continent.
Internet and connectivity startups followed closely in funding volume, buoyed by a significant deal from Kenya-based Mawingu Networks. Meanwhile, AgTech ranked as the third most-funded sector in November, affirming its importance in addressing Africa’s agricultural challenges.
Kenya leads the investment pack
Kenyan startups solidified their position as regional leaders, securing the lion’s share of funding. Nine Kenyan startups raised over $34 million, with deals spanning equity, debt, and hybrid financing structures. Key highlights included participation from prominent investors like FMO and AgDevCo, underlining Kenya’s appeal as a hub for entrepreneurial innovation.
Egypt took the second spot, with eight startups raising nearly $20 million, albeit through smaller ticket sizes. Senegal followed, bolstered by investments in renewable energy and job-creation platforms, notably SolarBox Africa and SociumJob.
Debt dominates in funding volume
Diverse funding instruments characterized the market in 2024. Debt funding, often overshadowed by venture capital, played a dominant role in terms of volume, with transactions totaling over $26 million for November alone. Debt-backed deals, though underreported, are increasingly shaping Africa’s financing landscape.
Equity remained the most frequently used instrument, with nearly 60 per cent of disclosed deals involving equity-based transactions. These ranged from early-stage investments of less than $1 million to growth-stage funding exceeding $50 million. The dual reliance on debt and equity highlights the adaptability of African startups in securing resources to fuel their growth.
Mergers and acquisitions gain ground
November saw three notable M&A activities, signaling consolidation in key sectors. Kenya-based Mawingu Networks acquired Tanzanian ISP Habari in an undisclosed deal, strengthening its presence in East Africa’s internet connectivity market.
In a cross-continental move, Kenya’s Eneza Education merged with Pakistan’s Knowledge Platform, expanding its reach to over a million learners in Africa and Asia. Meanwhile, UK-based SteamCo merged with Nigeria’s Shyft Power Solutions to enhance its energy technology offerings, particularly in IoT-enabled community-metering solutions.
These activities underscore a growing trend of strategic partnerships aimed at scaling operations and unlocking new markets amid funding constraints.
Overall, the decline in startup funding between January and November raises questions about the sustainability of Africa’s innovation ecosystems. However, the resilience displayed by sectors like cleantech, internet connectivity, and AgTech offers hope. Moreover, Kenya’s dominance in deal activity suggests that strong ecosystems and supportive regulatory environments can attract investment even in lean times.
As 2025 approaches, startups and investors alike must adapt to a more discerning and cautious funding landscape. Strategic partnerships, alternative financing mechanisms, and a focus on sectors with proven demand will be crucial for future growth.
Read also: July financing for startups in Africa hits record $420M as debt funding grows
