Startup Funding Drought: Where Are Africa’s Once Prolific Investors Going?

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Aaron Marin/Harvard Business Review

Africa’s burgeoning tech startup ecosystem, once a magnet for global investors, is currently experiencing a harsh reality. The once-promising landscape is now marred by a significant decline in startup funding. With a 57% drop in funding secured in the first half of 2024 compared to the previous year, the continent is grappling with a funding drought that has sent shockwaves through the entrepreneurial community. 

The Drying Investment Well

The data is stark: a significant portion of investors reviewed (about 59.1%) have curtailed their funding activities in 2024. This trend is evident among both local and international players. Firms like Voltron Capital and Zrosk Investment Management in Nigeria, Beyond Capital Ventures in the USA, and Nclude and A15 in Egypt are among those that have significantly reduced their investment pace.

The repercussions of this funding winter are far-reaching. Several investors have suffered substantial losses due to the recent failure of their African portfolio companies. EchoVC, DoB Equity, MSA Capital, Adaverse, Remapped Ventures, and B&Y Venture Partners are prime examples of firms grappling with the fallout from high-profile startup failures.

A Shift in Focus: Geographical Diversification

In response to the challenges in the African market, many investors (about 35.2%) are adopting a strategy of geographical diversification. This approach aims to spread risk and tap into new growth opportunities. Khwarizmi Ventures from Saudi Arabia, SOSV Select Fund from the USA, and Nama Ventures from Saudi Arabia are among those expanding their investment horizons.

Beta Ventures offers a compelling case study of this trend. The firm has dramatically shifted its focus away from African startups to explore opportunities in markets like Japan. Investments in HYDRONEXT, Enjoy Works, and Rayda underscore this strategic pivot.

The Missing in Action: Investors on Hiatus

A concerning trend is the emergence of a group of investors who have completely withdrawn from the African market (about 11.4%). Unicorn Growth Capital, Imperial Venture Fund, Accion Venture Lab, and KNF Ventures have been inactive for at least two years. While the reasons for this hiatus are varied, it undoubtedly exacerbates the funding challenges faced by African startups.

USA and Nigeria remain central to African venture capital, but a significant shift is occurring

  • Geographical Distribution: The majority of African prolific investors reviewed are based in the USA (30.7%) and Nigeria (13.6%), highlighting these countries as major hubs for venture capital.
  • Shift in Focus: Many of the investors are shifting their focus away from Africa, either diversifying geographically or ceasing investment activity altogether.
  • Diverse Strategies: Investors from Asian countries such as Japan, China and Saudi Arabia are increasingly exploring geographical diversification, suggesting a broader strategy to mitigate risks and capture new market opportunities.
  • Investment Pauses: A notable number of investors, especially from the USA and South Africa, have reduced their investment activities, reflecting either strategic reassessments or economic prudence. The termination of South Africa’s Section 12J tax incentive in 2021, which had provided substantial tax deductions for investments in venture capital companies, has significantly influenced investor behavior in the region. This policy change has resulted in a marked decline in South African investments in African startups.
  • Regional Impact: The reduction in funding is particularly impactful in Nigeria, Egypt, and South Africa, regions that traditionally have been significant beneficiaries of venture capital but are now experiencing a slowdown.

Implications for the African Startup Ecosystem

The current funding drought has profound implications for the African startup ecosystem. A decline in investment can hinder innovation, job creation, and economic growth. Startups may face difficulties in scaling their operations, attracting top talent, and competing globally. Moreover, the exit options for founders and early investors become limited, dampening the overall entrepreneurial spirit.

Additionally, the shift in investor focus towards geographical diversification could mean that African startups will need to work harder to attract investment. They may need to present stronger value propositions, demonstrate more robust business models, and perhaps even seek out alternative funding sources, such as local investors, government grants, or crowdfunding platforms.

The Bottom Line

While the current scenario paints a grim picture, it also offers an opportunity for introspection and recalibration within the African startup ecosystem. Startups and investors alike must adapt to the changing dynamics. For investors, this might mean developing a deeper understanding of local markets, building stronger relationships with local entrepreneurs, and fostering more resilient business models. For startups, this period could serve as a catalyst to innovate under constraints, pushing for greater efficiency and sustainability in their operations.

The startup funding drought in Africa is a multifaceted issue, rooted in a mix of market volatility, strategic shifts by investors, and broader economic challenges. Understanding where Africa’s once prolific investors have gone requires a nuanced analysis of their current strategies, including reduced funding activity, geographical diversification, and complete inactivity. While the immediate future may seem uncertain, the resilience and ingenuity of African entrepreneurs, coupled with strategic recalibrations by investors, could pave the way for a revitalized and more sustainable investment landscape.





S/ N
Name of Investor*LocationRecent Activity
1Voltron CapitalNigeriaLow funding activity in 2024.
2Khwarizmi VenturesSaudi ArabiaGeographical diversification
3Jeddar Capital USALow funding activity in 2024. 
4Zrosk Investment Management NigeriaLow funding activity in 2024.. 
5Beyond Capital VenturesUSALow funding activity in 2024. 
6Unicorn Growth CapitalUSANo funding activity in 2 years. 
7NcludeEgyptLow funding activity in 2024. 
8JAM FundUSAGeographical diversification and low funding activity in 2024.
9UI InvestmentsEgyptLow funding activity in 2024. 
10Bamboo Capital PartnersLuxembourgLow funding activity in 2024.
11Flexport VenturesUSAGeographical diversification.
12Century Oak CapitalLiechtensteinGeographical diversification and Low funding activity in 2024. 
13LightrockUKGeographical diversification and Low funding activity in 2024
14MaC Venture CapitalUSALow funding activity in 2024
15Platform CapitalNigeriaNo funding activity in 2 years. 
16Future CapitalNigeriaLow funding activity in 2024.
17Avenir Growth CapitalUSAGeographical diversification and low funding activity in 2024
18CDG Invest (Corporate VC arm of CDG Group)Rabat, MoroccoGeographical diversification and low funding. 
19MAGIC FundUSAGeographical diversification and low funding.
20Global Founders CapitalUSAGeographical diversification.
21Berrywood CapitalNigeriaNo funding activity in 2 years. 
22Picus CapitalGermanyGeographical diversification
23Suya VenturesNigeriaLow funding activity in 2024. 
24Flori Ventures USALow funding activity in 2024. 
25Coinbase VenturesIcelandGeographical diversification
26Alameda ResearchHong KongDeadpooled
27Cadenza Capital ManagementUSAGeographical diversification
28SoftBank Vision Fund Emerge ProgramUSALow funding activity in 2024. 
29A15EgyptLow funding activity in 2024. 
20SOSV Select FundUSAGeographical diversification
21Remapped VenturesCanadaNo funding activity in 2 years.
22Five35 VenturesSouth AfricaLow funding activity in 2024.
23The Continent Venture PartnersUSA; KenyaLow funding activity in 2024.
24Firstminuite CapitalUKGeographical diversification
25Oui CapitalNigeriaLow funding activity in 2024.
26E Squared InvestmentsSouth AfricaLow funding activity in 2024.
27Uncovered FundJapanLow funding activity in 2024.
28Alter GlobalUSALow funding activity in 2024.
29LoftyInc CapitalNigeriaLow funding activity in 2024.
30Hustle FundUSAGeographical diversification and low funding activity in 2024. 
31Lateral Frontiers VCUSALow funding activity in 2024.
32Capria VenturesUSAGeographical diversification.
33Velocity DigitalNigeriaLow funding activity in 2024.
34Azur Innovation PartnersMoroccoLow funding activity in 2024.
35Acuity VenturesUSANo funding activity in 2 years
36Apis Partners LLPUKGeographical diversification and low funding activity in 2024
37Base CapitalSouth AfricaLow funding activity in 2024.
38Nama VenturesSaudi ArabiaGeographical diversification.
39Tribe CapitalUSAGeographical diversification.
40KFW DEGGermanyGeographical diversification.
41Kingsway CapitalUKGeographical diversification and low funding activity in 2024.
42Beta VenturesNigeriaGeographical diversification and low funding activity in 2024.
43Flat6LabsEgyptGeographical diversification
44HoaQ ClubDublin, IrelandLow funding activity in 2024
45B&Y Venture PartnersUKGeographical diversification
46LocalGlobeLondon, UKGeographical diversification
47EchoVCNigeriaLow funding activity in 2024
48Enygma VenturesUSALow funding activity in 2024
49Golden Palm InvestmentsGhanaLow funding activity in 2024
50Orange VenturesFranceGeographical diversification and low funding activity in 2024.
51DOB EquityNetherlandsLow funding activity in 2024.
55Global VenturesDubaiGeographical diversification and low funding activity in 2024.
56Chandria CapitalNairobi, KenyaLow funding activity in 2024.
574DX VenturesUSAGeographical diversification and low funding activity in 2024.
58GreenHouse CapitalNigeriaLow funding activity in 2024
59Goodwell InvestmentsNetherlandsLow funding activity in 2024
60Sawari VenturesEgyptLow funding activity in 2024
61MSA CapitalBeijing, ChinaGeographical diversification and low funding activity in 2024.
62AdaverseSingaporeGeographical diversification
63Imperial Venture Fund (Newtown Partners)South AfricaNo funding activity in 2 years.
64Saviu VenturesFranceGeographical diversification and low funding activity in 2024.
65Kalon Venture PartnersSouth AfricaLow funding activity in 2024
67Musha VenturesNew York Area, USAGeographical diversification and low funding activity in 2024.
68Outlierz VenturesMoroccoLow funding activity in 2024
69Samurai IncubateJapanGeographical diversification
70Vision VenturesSaudi ArabiaGeographical diversification and low funding activity in 2024
71Mobility 54 Investment Fund (Toyota Tsusho) & CFAO GroupJapan Low funding activity in 2024
72Foundation VenturesEgyptLow funding activity in 2024
73Beco CapitalUAEGeographical diversification
74MicrotractionLagos, NigeriaLow funding activity in 2024
75P1  VenturesUSALow funding activity in 2024
76Soma CapitalUSAGeographical diversification
77Enza CapitalKenyaLow funding activity in 2024.
78Accion Venture LabUSANo funding activity in 2 years. 
79Flourish Ventures USAGeographical diversification.
80Breyer CapitalCalifornia, USAGeographical diversification.
81Consonance Investment ManagersNigeriaLow funding activity in 2024.
82Sunu CapitalUSALow funding activity in 2024.
83Social CapitalUSAGeographical diversification and low funding activity in 2024.
84Plug and Play VenturesUSAGeographical diversification.
85KNF Ventures (Knife Capital)South AfricaNo funding activity in 2 years. 
86Raed VenturesSaudi ArabiaGeographical diversification
87Convergence PartnerSouth AfricaLow funding activity in 2024.
88Rally Cap VenturesUSAGeographical diversification. 
*Investors captured must have made at least more than two investments in startups. Data based on publicly available information.

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