Egyptian startups have raised the highest amount of equity funding in Africa, receiving $540 mn in funding between June 2022 and July 2023.
The data was released by the African Private Capital Association (AVCA) in a recently published report. In addition, the research also highlighted a “funding winter” emerging in the region as tech finance across the continent is slowing down.
Rise of Egyptian startups
Egypt has emerged as the frontrunner in total equity funding received in the region. It was the only country to climb over the half-billion mark during the focus period. However, the figure represents a 25 percent decrease in terms of funding raised during the previous year.
With Egyptian startups performing well, Egypt managed to overtake Nigeria, Africa’s largest economy.
According to AVCA, various factors have contributed to Egypt’s success, including a vibrant entrepreneurial ecosystem and supportive government initiatives. Startups have achieved significant milestones, showcasing the country’s potential for innovation and growth.
Read: Egyptian startups attract $491 million in funding in 2021
Nigeria’s decline
In contrast to Egypt’s rise, Nigeria has experienced a decline in startup funding. Capital infusion for Nigerian tech firms fell by 77 percent year on year, reaching $470 mn from $2 bn.
Nigerian startups have faced challenges such as regulatory constraints, limited access to capital, and a challenging business environment.
These factors have contributed to the decline in Nigeria’s startup capital and pose questions about the country’s future role in Africa’s tech ecosystem.
‘Funding winter’
The report says the slowdown in tech funding extends beyond Egypt and Nigeria, impacting the overall African startup ecosystem.
The ‘funding winter’ between June 2022 and July 2023 saw a decline in funding, compared to the ‘funding heatwave’ experienced in the previous year.
The Big Four African countries (Nigeria, Kenya, South Africa, and Egypt) jointly raised $4.6 bn in the previous period, which decreased to $1.7 bn in the latest funding season.
According to the World Economic Forum, 92 percent of Africa’s investment in tech is won by just four countries: Nigeria, Egypt, Kenya and South Africa. The financial sector, particularly fintech, continues to attract the most equity funding, albeit at a slower pace.
Experts say the funding slowdown in Africa reflects a global response to high volatility and inflationary forces in many economies that are prompting investors to rethink their strategies. In addition, investors are demanding more from founders and tech companies in Africa before committing to fund their ventures.
Bright spots
Despite the challenging landscape, some markets managed to achieve growth amidst the unfavorable environment. Côte d’Ivoire and Cameroon experienced funding growth of 15 percent and 34 percent, respectively.
Max Cuvellier, head of mobile for development at GSMA, who co-authored the report, stated, “Against all odds, three markets managed to pull off growth in this unfavorable context. Funding grew in Côte d’Ivoire (+15 percent YoY), and in Cameroon (+34 percent) where it crossed the $10 mn mark.”
Notably, Algeria witnessed a significant jump in start-up funding from $30 mn to $150 mn due to a single investment by YASSIR, a multi-sided marketplace offering on-demand services. This demonstrates the resilience and potential for growth in certain African markets.
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