Grace Ashiru
The first half of 2024 marked a significant shift in the valuation trends within Africa’s venture capital scene, demonstrating a departure from previous years’ investment patterns. Despite a global slowdown in venture funding, certain segments within the African market showed surprising resilience and growth, highlighting the evolving dynamics of the region’s startup ecosystem.
A Rise in Seed Valuations
One of the most notable trends in H1 2024 was the sharp increase in seed-stage valuations. Mean and median valuations at the seed stage saw a 79% and 100% year-on-year increase, respectively, compared to 2023. This surge in valuations contrasts sharply with other emerging venture markets (EVMs) like the Middle East and North Africa (MENA) and Southeast Asia (SEA), where seed valuations experienced declines during the same period. Out of the 22 seed deals secured in the first half of 2024, more than half surpassed the mean and median valuations recorded in 2023, showcasing robust investor confidence in early-stage startups in Africa..
Shift Away from Pre-SEED and Accelerated Deals
The rise in seed valuations aligns with a noticeable shift away from pre-seed and accelerated deals. Investors have shown a growing preference for more established startups with proven concepts and early traction, which is reflected in the increasing number of seed deals and their higher valuations. This focus on seed and pre-Series A rounds suggests a more cautious investment approach, favoring ventures that have moved beyond the initial concept phase.
This trend mirrors similar patterns observed in MENA, where investors have also favored the $1 million to $5 million deal size, reflecting a broader regional shift towards investing in less risky, early-stage opportunities
Decline in Series A Valuations
While seed-stage startups enjoyed higher valuations, Series A deals faced a different scenario. Both mean and median valuations for Series A rounds declined by 43% and 44%, respectively, compared to 2023. This decline marks the second consecutive year of decreasing Series A valuations, suggesting a cooling market sentiment for startups seeking growth-stage capital. Interestingly, the gap between mean and median Series A valuations narrowed, indicating a more uniform valuation landscape and fewer outliers commanding exceptionally high valuations. This decline brings Series A valuations back to levels seen during the COVID-19 pandemic in 2020, further highlighting the cautious stance of investors
The Middle Ground Prevails
The mid-range deal sizes ($5 million to $20 million) have continued to gain traction, accounting for a higher percentage of total deals. This trend reflects a preference among investors for growth-stage startups that require moderate capital injections, rather than engaging in the higher-risk pre-seed stage or the more capital-intensive late-stage investments. The $5 million to $20 million range saw a steady increase, underscoring a shift in investor strategy towards nurturing companies that show clear potential for scaling without the need for excessive capital
Conclusion: A Cautious Yet Optimistic Outlook
Overall, H1 2024 valuation trends in Africa’s venture capital market reveal a mixed picture of cautious optimism. While seed-stage startups are attracting higher valuations, indicating strong confidence in early-stage ventures, the cooling Series A valuations point to a more reserved approach among growth-stage investors.
The increased focus on the $5 million to $20 million deal sizes suggests that investors are selectively supporting startups with proven models and scaling potential, aligning their strategies with the broader economic uncertainties that have characterized global markets this year. As the year progresses, these valuation trends will likely shape the strategic directions of venture capital investments across the African continent .
Source ( MAGNiTT H1 Report
