Global tensions reverberate across the African innovation ecosystem. The figures remain comparable to those of the past year; What is missing, however, is growth, which more than any other metric characterizes the startup and scaleup sector.
The projections for 2023 show a slight slowdown step compared to the previous year: the total funds raised to date by startups on the continent would have reached 3.28 billion dollars, compared to 4.7 billion for the whole of 2022 and 5.3 billion in 2021. The data refers to the deals announced and arrive from Briter Bridges, a business intelligence company based in Nairobi, which, while waiting for the reports of the major international companies to be released in the first months of the new year, is able to take a snapshot. The company monitors the market via a platform that provides updated statistics; among customers, governments, companies and large international organizations such as the World Bank.
Big four
Nigeria, Kenya, South Africa and Egypt the strongest countries in terms of collection and number of rounds. “The bulk of the total is made up of a few large deals,” he says Dario Giuliani, founder and managing director of Briter Bridges. “There has been a decline – he confirms -, this year we will see less money, but Africa has not been immune from global tensions in the last period. On the other hand, a large part of the funds comes from European, Arab, Americans, Chinese and Japanese who have partially withdrawn in the last period. Around here we talk about winter funding“.
Financing rounds are also decreasing: 670 have been announced to date, compared to 1,018 in the whole of 2022 and 815 in 2021.
Giuliani, however, invites us to broaden our gaze. “The numbers must be judged from a ten-year perspective. Let’s take those of 2013 as a reference: then, across the entire continent, the collection reached just 71 million dollars, with sixteen deals announced. Since then, the progression has been constant: a slight decline does not call into question the trend, which remains unquestionably one of growth” continues the analyst. “It should be remembered that what has been collected here is worth a small fraction of global funding, and the margins for growth remain very broad”.
Africa seemed immune to the slowdown in funding that hit Europe. “But in recent years in the West hundreds of millions have been given to companies that did not make profits on the basis of simple bets; companies that perhaps produced the latest filter for Instagram. When the world found itself dealing with war , the energy crisis, the globalization crisis, investors have gone back to focusing on the matter and have preferred to concentrate investments on a smaller portfolio of companies. The effects have also been seen here, where, however, startups often solve real problems “.
Rise of greentech
Il fintech, which has already given several unicorns to the continent (especially in Nigeria) This year too it ranks among the most financed sectors. According to data from Briter Bridges he would place himself in front of everyone Mnt-Halan (an Egyptian bank) with $689 million raised; they follow Zepz and the Nigerian Oops (656 and 570 million dollars, respectively, electronic payments). It should be noted, underlines Giuliani, “that several companies that we have considered mainly conduct their operations in Africa even if for tax reasons they are formally based elsewhere: from our point of view they can therefore be attributed to the continent”.
Also greentech runs fast. He arrives in front of everyone Sun King, which designs, produces, distributes and installs solar panels (722 million raised). Continued M-Cup, an asset financing platform that allows non-bankable entities to purchase panels, cell phones and equipment to develop the business (491 million). Third place for Zola Electric (Tesla is in the capital, 198 million raised, the scope in this case too is that of solar energy).
New tools
Overall, the innovation ecosystem in Africa has come out of swathes. “It’s the end of the beginning”, summarized the consultancy firm McKinsey last year. However, companies and investors must deal with a regulatory framework that is backwards (except in South Africa), and which is very different depending on the country. The dependence on external funds is still too pronounced. However, there is no shortage of positive notes. “We are witnessing a diversification of the methods of access to capital” explains the Italian analyst. “While previously there were only non-repayable grants, today, in addition to venture capital, we find companies active in private equity and companies with corporate venture programs such as Mitsubishi and Toyota. The novelty is asset financing, which allows you to take I lend money by offering the assets on the balance sheet as collateral”. A method capable of procuring funds in a short time, without going through a business plan, and which reduces the importance of the bank’s assessments of future prospects. Important detail when it comes to innovation, often difficult to understand. The ecosystem lags behind, and by a long way, if you look instead at the gender gap. “There has been a strong push from investors, especially public ones, to support women-led businesses” concludes Giuliani. “There are several funds specifically dedicated to women such as Enygma Ventures, Alitheia IDF and Shequity. The percentages of the total, however, remain low”.