Grace Ashiru
Amidst a backdrop of global economic uncertainty and a notable decline in overall venture capital funding, the African startup ecosystem has seen several significant developments in the first half of 2024. Despite a 57% year-on-year drop in total funding, new venture capital funds and strategic partnerships are emerging to drive innovation and sustainability across the continent.
New Funds Launched to Boost Early-Stage Startups
Paris-based venture capital firm Breega has announced the launch of the Breega Africa SEED Fund I, valued at $75 million. This fund is designed to support early-stage startups focusing on high-impact and sustainable innovations in key African markets, including Nigeria, Egypt, South Africa, and Kenya.
Additionally, Breega will extend its reach to French-speaking countries such as Morocco, Senegal, Ivory Coast, Cameroon, and the Democratic Republic of Congo. Breega’s investments, ranging from $100,000 to $2 million, are expected to complete at least 40 deals, signaling strong international confidence in Africa’s startup potential.
In a similar vein, French venture capital firm Ring Capital has introduced the Ring Africa impact fund, worth €50 million, targeting early-stage startups in French-speaking West Africa. This fund will focus on companies that address social and environmental challenges, particularly those related to climate change, formal economic transition, and agricultural productivity. Such initiatives underline a growing trend towards sustainable and socially responsible investment in Africa.
Local and Regional Initiatives Empowering Innovation
Local firms are also making strides to support the growth of Africa’s startup ecosystem. Conducive Capital, a South African venture capital firm, has launched a $50 million fund aimed at investing in early and growth-stage startups centered around disruptive technologies. Notably, Conducive Capital aims to diversify the venture capital landscape by empowering black women investors, a group that remains underrepresented in the industry.
In addition to private sector initiatives, government-backed programs are being established to foster innovation. The UNDP, in collaboration with the Timbuktoo African Innovation Foundation, has launched the first Timbuktoo FinTech Hub in Lagos. This hub aims to scale 25 African startups by providing a collaborative workspace, mentorship, and access to advanced technologies. It seeks to drive innovation within the Pan-African FinTech ecosystem, ultimately promoting socio-economic development across the continent.
Trends and Insights from the African Venture Capital Landscape
Despite the overall decline in funding, the report highlights a growing role for local investors in the African venture capital space. The share of capital deployed by local investors has increased for the third consecutive year, indicating a shift towards more localized funding sources and a reduction in dependency on international capital. This trend reflects a deepening confidence in the potential of African startups to deliver significant returns and contribute to regional economic growth.
Furthermore, while Series A valuations have declined for the second consecutive year, SEED valuations have seen a sharp rise, with both mean and median valuations increasing significantly. This increase in early-stage investment points to a strategic focus on nurturing nascent companies and technologies, which could lead to substantial long-term growth.
Conclusion
The first half of 2024 has been a period of both challenge and opportunity for Africa’s venture capital ecosystem. While overall funding has declined, new funds, strategic partnerships, and local initiatives are laying the groundwork for sustainable and inclusive growth. The emphasis on early-stage, socially responsible investments and the growing participation of local investors highlight the resilience and adaptability of Africa’s startup ecosystem, positioning the continent as a significant player in the global venture capital landscape.
(Source MAGNiTT, H1 2024 Africa Venture Investment Report)
