Africa’s start-up ecosystem has been steadily growing over the years, attracting significant investments from both local and international sources. According to disrupt Africa, funding raised by start-ups in Africa has grown from Sh1.9 billion ($12million) in 2013 to Sh791.25 billion ($5 billion) in 2022.
However, funding in the continent has taken a hit, forcing a number of start-ups to close down. Even among the big four countries; Kenya, Egypt, South Africa, and Nigeria that are dominant in the start-up industry have been greatly affected.
The “Africa: The Big Deal, a database on the start-up ecosystem in Africa” report shows that African start-ups have managed to raise Sh 458.93 billion ($2.9 billion) in 2023 with the four dominant players being responsible for 87% of all the start-up funding in the continent, their largest share since 2019 – 500 companies in Africa managed to raise over Sh15.83 million ($100,000), a 39% decrease compared to 2022 when the number stood at 821.
Out of the four countries, Kenya came out on top in 2023 as Kenyan start-ups managed to attract the most funding, raising about Sh126.6 billion ($800 million) or 28% of the continent’s total funding. The country recorded a total number of 99 start-ups that raised over Sh15.83 million ($100,000), representing 19% of the continent’s total. The country’s start-ups were responsible for driving innovation in a number of sectors such as fintech, healthcare, agri-tech and e-commerce.
However, despite coming out as the frontrunner, the country’s ecosystem still recorded a decline in comparison to the previous year. While Kenyan start-ups raised funds amounting to about Sh174.08 billion ($1.1 billion) in 2022, witnessing a 25% decline, they managed to increase their share in Eastern Africa from 86% in 2022 to 91% in 2023. The eastern Africa region attracted Sh139.26 billion ($880 million) in 2023, with 31% of all the start-up investment on the continent coming in the region. In terms of numbers, the region was responsible for 130 start-ups over the Sh15.83 million ($100,000).
Nigeria which was the leading country among the big four in 2022 having raised funds worth Sh189.9 billion ($1.2 billion), had the most dramatic change in 2023. Despite recording the highest number of start-ups to raise funding at 146 in 2023, start-ups from the west African country only managed to raise Sh64.99 billion ($410 million) in 2023. As a result, Nigeria’s share of Western African funding continued to decline, reaching 68%, the lowest regional share among the Big Four countries since 2019.
Egypt, despite having the lowest number of start-ups raising Sh15.83 million ($100,000) or more in 2023 among the Big Four, managed to secure the second spot in terms of overall funding. The country witnessed a 20% decline in funds raised compared to the previous year. Egypt’s share of North African funding increased significantly from 72% in 2022 to an impressive 95% in 2023. This growth can be attributed to the success of MNT-Halan’s fundraising efforts and the relatively weaker performance of Algeria and Tunisia in 2022.
South Africa on the other hand, continues to lead the regional funding landscape, with a 97% share of the funds raised in Southern Africa. The country witnessed an 8% year-on-year growth in total funding, with 70 start-ups raising Sh15.83 million ($100,000) or more and cumulating Sh94.95 billion ($600 million) in funding in 2023 from Sh87.83 billion ($555 million) in 2022.
While the Big Four countries dominate the start-up landscape in Africa, other African nations have been increasing their portion of the funding landscape, accounting for 13% of the total funds raised and 29% of start-ups from these countries raising over Sh15.83 million ($100,000). This highlights the growing diversity and potential of the African start-up ecosystem.
