Anticipated Trends in African Tech for 2024

As we reflect on the challenges and shifts in the market throughout 2023, it becomes evident that the year was a mixed bag for funding in the African startup ecosystem. The data indicates a significant 41.7% quarter-on-quarter decline in venture capital (VC) funding, dropping from $916 million in Q2 to $499 million in Q3. The total funding raised by African startups in 2023 stands at $3.246 billion as of November 30, showcasing a notable 36% decrease from the peak of $5 billion in 2022. The decline is indicative of the struggles investors faced in raising funds during the year.

Despite the funding downturn, there were positive developments in 2023. The emergence of a new African unicorn, MNT-Halan, marked a significant achievement for the Egyptian fintech startup. Additionally, firms like Partech and M-Kopa surpassed fundraising expectations, each securing over $250 million. Flutterwave made progress toward its IPO goal after being cleared of financial misconduct in Kenya, and Nigeria's central bank adopted a more crypto-friendly policy stance.

Looking ahead to 2024, several trends are worth noting:

• Continued Funding Challenges and Cost-Cutting Measures: Startups are likely to face ongoing funding challenges in 2024, leading to continued cost-cutting measures and a renewed focus on unit economics. This may involve localizing costs, scaling back operations, and prioritizing survival in an uncertain funding environment.
• Consolidation through Mergers and Acquisitions: The trend of mergers and acquisitions (M&A) is expected to continue, driven by larger companies seeking to acquire earlier-stage companies. Seven M&A deals valued at approximately $710 million set the tone in early 2023, with Biontech's acquisition of AI firm Instadeep leading the way.
• Increased Application of Artificial Intelligence: Artificial intelligence (AI) is anticipated to see wider application across various sectors, including payments and health infrastructure. Digital commerce platforms may adopt AI tools with precision, targeting specific functionalities rather than implementing sweeping changes.
• Cautious Optimism among African Investors: Despite the challenges, African investors express cautious optimism. A survey indicates that 85% of Limited Partners (LPs) plan to increase their allocation to private capital in Africa over the next two years. Impact and investment mandate are identified as primary reasons for this optimism.
• Possible Shifts in Regional Preferences: Investors may reconsider their regional strategies in response to changing macroeconomic and political conditions. Elections in fifteen African countries in 2024 could influence regional preferences, with West Africa favored by LPs and East Africa by General Partners (GPs).

While the challenges of 2023 are acknowledged, the outlook for 2024 remains optimistic, with opportunities for growth and resilience in the African startup ecosystem.

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