Earlier this week, we reported that African startups raised $2.9 billion in 2023. The sum was a 39% drop in the region’s 2022 figure when it raised $4.6 billion from several VC deals. Africa’s startup funding in 2023 had it all.
From the report, we noted that the number of African startups raising at least $100k remained stable, and the average deal size remained steady. The report also noted that debt financing constitutes 38% of all funding raised, up from 16% in 2022.
While investors have been bullish on African startups in the last three years, they have also not looked back on startups in the West and Asia. It is unlikely that any nation will overthrow the US in attracting venture capital anytime soon.
However, investor interest in Africa is growing, but given that markets are less mature, investments tend to be smaller in size. At Techeconomy, we look at how Africa compares to the rest of the world in terms of funding in 2023.
Total Startup funding in Africa, the US, Asia, and Europe, 2021-2023
The table shows that since hitting high figures in 2021, the USA, Asia, and Europe have all seen funding rates spiral downward in 2022 and 2023. For Africa, one can even say it was lucky to escape a similar fate in 2022. The 2023 figure shows that the region is not immune to the global funding winter.
With just a little over $300 billion raised in 2023, it is easy to see that the global tech scene returned to pre-pandemic levels when the figure was normal.
Although funding raised this year has decreased by 30%, the U.S. continues to be the largest venture capital market. According to PitchBook, the amount was $166.5 billion, down from $242.3 billion for the entire year 2022.
With just about 10,000 deals recorded, it’s been European tech’s slowest year since 2017. Deal volume in 2023 was roughly half that of record-setting 2021 and two-thirds that of 2022. European startups raised $63 billion across over 10,000 funding rounds, down 37% in 2022.
According to data from market research firm PitchBook, the total amount raised by Asian startups in 2023 was $86.5 billion, down from $141.9 billion in 2022 and a small portion of $221.4 billion in 2021.
Total Startup funding in Africa, 2021-2023
While a 39% year-on-year drop in overall funding might seem alarming, several promising trends, such as the number of startups raising at least $100k and remaining stable, become a huge positive for the ecosystem.
Meanwhile, the concentration on early-stage startups was not common to just Africa. In 2023, the unicorn board in America and Europe grew a little more deserted. According to Sifted, only five new $1 billion+ startups were founded in Europe, down from 108 and 48 in 2021 and 2022, respectively.
In 2023, there were just 44 new unicorns in North America, down from 195 in 2022 and 360 in 2021.
Besides, many founders experienced a low point following the swift collapse of Silicon Valley Bank in March 2023. Moreover, the rising interest rates must have starved the riskiest businesses of funds. Investors prioritized low-risk early-stage firms in 2023 as a result of strategies for living leaner echoing across the walls of many startups.
There are a ton of predictions out there right now about how AI will transform society and give us superheroes in productivity. Nobody who follows the tech industry was surprised that artificial intelligence firms made a splash in 2023, generating around $50 billion, a slight increase over 2022. The majority of businesses have covered their losses by subtly adding the letters “AI” to their pitch decks and websites.
75% ($16 billion) of the funding since 2018 has gone to GenAI startups based in the United States; the remaining fifteen percent came from Israel, Germany, France, the United Kingdom, and China. However, the fact that 40% of all deal volumes were with early-stage startups makes us wonder why almost nothing has been invested in African AI startups. This is a discussion for another day.
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