Africa seemed to defy the global decline in venture capital funding in the first half of 2022 after the startups raised $3 billion, double the amount raised in a comparable period the previous year. However, the correction in the VC market overtook the continent in the second half of last year, as ticket sizes fell and fewer deals closed as investors tightened wallets.
VCs are now predicting that the funding slowdown in Africa will continue into 2023 as investors continue to pull out, making it more difficult for new and existing startups to raise capital.
“My prediction for 2023 is that it will get worse before it gets better – down rounds, layoffs, closures and bridging rounds will continue to increase in the African startup ecosystem.” Abel Boreto, Novastar Ventures
“As the global economic slowdown seeps into 2023 due to inflationary pressures and tighter monetary policy, investors on the continent will maintain a prudent approach to investment and African startups will continue to find it difficult to raise money,” says Bruce Nsereko-Lule , general partner at Seedstars Africa Ventures.
As a ripple effect, the working environment for startups is expected to deteriorate this year, leading to a wave of layoffs, winding down operations, down-and-bridge rounds and company closures, continuing the trend that picked up in late 2022.
Megarounds are also expected to be scarce, as was the case in the last half of 2022 when no deals over $100 million were signed, according to The big deal, a database of publicly disclosed deals. A total of six mega-rounds were closed last year (all in the first six months), half the number of such deals closed in 2021, when VCs invested record amounts.
Janice has been with businesskinda for 5 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider businesskinda team, Janice seeks to understand an audience before creating memorable, persuasive copy.