Venture funding in Africa in 2023 H1: A Kenyan perspective

If you’re a founder you’ve probably Googled different types of funding and probably used one or two methods to raise fund your startup. However, if you are new, well, here are some of the most common way:

• Bootstrapping: This is when founders use their own savings, income, or assets to fund their startup.

• Crowdfunding: This is when startups raise funds from a large number of people, usually through online platforms such as Kickstarter or Indiegogo.

• Angel investors: These are wealthy individuals who invest in startups in exchange for equity or convertible debt. (If you follow me on twitter or is it X, I have talked about NAIBAN. I’ll be doing a piece on them later)

• Venture capital: These are firms that invest in startups in exchange for equity or convertible debt.

VENTURE FUNDING IN AFRICA

The vibrant African tech ecosystem witnessed a notable shift in investment trends during the first half of 2023. According to data sourced from MAGNiTT, a leading venture capital data platform, VC firms allocated $951 million to various ventures, reflecting a 54% downturn from the figures seen in H1 2022. The cautious approach of investors has also resulted in a significant drop in the number of deals, which fell by 50% compared to the previous year.

Despite the downturn, Fintech emerges as the resolute favorite of VC firms, managing to secure a commendable 29% of the total funding invested. Ecommerce and transport and logistics startups hold their ground as well, capturing the attention of investors and garnering 12% and 11% of the overall funding, respectively.

By country, Nigeria lead the pack in terms of deal volume, followed by Kenya and South Africa. In terms of deal value, Egypt leads the continent, mainly driven by the $260 million MNT Halan deal in February, followed by South Africa which saw a 3% reduction in deal value and Nigeria.

THE KENYAN SITUATION

Kenya, which was the top destination for VC funding in Africa in 2022 with $969 million, has seen a significant drop in H1 2023, raising only $344.3 million2. This is partly due to the absence of mega-rounds like the $400 million Series C raised by mobile money platform M-Pesa in 2022.

However, Kenya still remains one of the most vibrant and diverse tech ecosystems on the continent, with startups operating in sectors such as edtech, agritech, healthtech, e-commerce, and energy. Some of the notable deals in H1 2023 include:

• Twiga Foods: Raised $50 Million in a Series B Round Capital Led by Blue Earth

• Kwara: Raised $25 Million in a Series A round

• Lipa Later: Raised $15 Million in a Series B round

• Ilara Health and Koko Networks raised $10 Million and $8 Million respectively.

So how can Kenyan founders navigate this challenging space and secure funding for their ventures? Here are some tips:

• Build relationships: Investors are more likely to invest in people they know and trust. ( A NAIBAN Investor told me he is mostly likely to invest in any project if he likes the founder)

• Validate the problem and solution: Investors want to see evidence that the startup is solving a real and meaningful problem for a large and growing market.

• Be flexible and adaptable: Investors are looking for startups that can adapt to changing market conditions and customer needs.

• Tell a compelling story: Investors are not only interested in numbers and facts, but also in stories and emotions. (Are you even serious if as a founder you can’t tell a compelling story?)

While getting funded is becoming harder, only a founder who has a worthy project and can tell a compelling story will probably get that boost they need.

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Have a lovely week.