IN JANUARY 2024, AFRICAN STARTUPS SECURED FUNDING AMOUNTING TO $83 MILLION(News Reports: TIMI ODUESO)
In the initial month of 2024, African startups experienced a slow start, securing only $83 million across 31 disclosed deals, as reported by Africa: The Big Deal. This reflects a substantial decrease from the $545.1 million garnered in 20 deals during the corresponding month in 2023, indicating an 84.8% year-on-year decline.
It’s worth noting that the fundraising activity in January 2023 was significantly impacted by a single large deal: the $443 million acquisition of AI company Instadeep by BioNTech. Excluding this exceptional case, African startups in January 2023 raised approximately $99.1 million, resulting in a more modest year-on-year decrease of 16.2%.
This implies that the fundamental growth of the African tech ecosystem appears relatively stable, despite the attention-grabbing slowdown in funding.
Image source: TechCabal|Timi Odueso
In terms of funding, the top three sectors are as follows: agritech, securing $26.3 million in funding, followed by cleantech with $18.1 million, and healthtech with a more modest $13.5 million. Several sectors, especially fintech, have experienced a decline in funding compared to previous years. With a global funding downturn, investors are increasingly directing their attention to startups with established track records of traction and growth, resulting in fewer resources available for exploratory ventures.
In January 2024, three out of the four logistics startups—Bosta, FriendlyM, and Roboost—that raised funds were based in North Africa, specifically Egypt. Last year, logistics startups garnered significant interest, ranking as the fourth sector with the highest funding at $205 million. Although only a portion of this funding originated from North Africa, Egypt’s logistics sector may attract increased attention this year, fueled by the growing success of mobility startup Swvl. Swvl achieved its first-ever net profit of $2.1 million last year after incurring losses of $161 million in 2022.
Early in the month, the European Investment Bank (EIB) injected capital into an Africa-focused venture for the third time, selecting Seedstars as the recipient with a substantial $30 million investment. Seedstars plans to allocate 50% of the funds across francophone Africa, with selected startups receiving amounts ranging from $250,000 to $2 million. Additionally, Seedstars secured an additional $10.5 million from the African Development Bank (AfDB) later in the month.
On the strategic front, unicorn founder Iyin Aboyeji and investment heavyweight Mia von Koschitzky-Kimani collaborated to launch what is now dubbed “The YC of Africa” – Accelerate Africa. This Nigeria-based accelerator aims to provide business and product development expertise to 10 pre-seed and seed-stage startups, preparing them for investor pitches.
In Egypt, T-vencubator, a VC Firm-Incubator hybrid, emerged, expressing its commitment to investing in “exceptional talents shaping Egypt’s future.”
2. Mergers and Acquisitions: Access Holdings Completes Trio of Acquisitions in One Month Access Holdings, the parent company of Nigeria’s Access Bank, demonstrated a lesson in acquisitions by finalizing three deals within a month.
In early January, the acquisition of Zambia’s Atlas Mara was completed, more than two years after the merger was initially announced. Shortly thereafter, the acquisition of insurance brokerage company Megatech Insurance was successfully concluded.
One of the most significant acquisitions involved ARM Pensions, Nigeria’s second-largest pension fund manager, which received regulatory approvals just days before the end of the month. These acquisitions underscore Access Holdings’ strategic expansion across the continent.
3. Business Model Pivots: Kippa and Zilla Shift Directions As contributors to the 2023 Wrapped article predicted, January witnessed the initiation of business model improvements as two startups executed pivots.
Zilla, originally launched as a buy-now-pay-later product in 2021, altered its course and pivoted to focus on cross-border payments. Challenges in communicating the buy-now-pay-later model to customers reportedly influenced this decision.
Kippa, faced with a $31,000 internal fraud case, declared its transition from fintech to edtech. The company had previously transferred its agency banking product, KippaPay, to another startup in the past year. Now, it has launched an edtech platform allowing users to create courses using AI.
4. Shutdowns: Cova Ceases Operations, Woven Finance Reverses Shutdown Announcement While some startups adapted their models, others brought their operations to a close.
On January 24, asset management platform Cova notified users of its decision to cease operations by February 10. While specific reasons were not provided, CEO Oluyomi Ojo had mentioned in a 2021 interview that users were still adjusting to the concept of a startup facilitating asset ownership transfer in the event of death. Cova had raised $800,000 during its operational period.
In a surprising turn, Nigeria-based startup Woven Finance initially announced its shutdown through an email but later retracted the claim, stating that the email was sent in error.
5. Leadership Changes: CEOs Step Down – Njonjo, Grover, Osibodu, and Ekezie Alongside startup developments, January saw several CEOs bidding farewell to their companies.
Ashkay Grover, CEO of Cellulant, stepped down in order to focus on personal matters. The company had reportedly undergone a third round of layoffs just a month prior to Grover’s exit.
Peter Njonjo, co-founder and CEO of Kenyan agritech Twiga Foods, resigned from the company’s board after serving as CEO for ten years. Investigations suggest that Njonjo was compelled to step down by investors who rescued the company from a lawsuit with a $35 million investment.
Tosin Osibodu, co-founder and CEO of Chaka, exited the company to concentrate on a new venture named Alpaca. Chaka was acquired by Risevest the previous year, and Osibodu left the company under the leadership of Risevest CEO Eke Urum.
Duke Ekezie, co-founder of Kippa, parted ways with the fintech startup he co-founded with his brother, Kennedy Ekezie. Duke reportedly aims to focus on a new venture previously discussed with Kennedy.
6. Financial Success Stories: Swvl Achieves First Net Profit, TymeBank Attains Profitability Two companies celebrated financial success in January.
MENA-based mobility startup Swvl reported its first net profit of $2.1 million and an operating profit of $13.4 million, marking a significant shift from the $56 million operating losses reported in H2 2022. Swvl’s transition into a B2B business and the strategic sale of some subsidiaries contributed to this turnaround.
South African neobank TymeBank accomplished a rare feat by achieving profitability within five years of its launch. Two months after reaching 8 million subscribers and six months after reporting $45 million in losses, TymeBank announced over $215 million in annualized revenue.
7. Cybersecurity Measures: Nigeria and Ghana Combat Mobile Money Fraud West African nations took steps to combat fraud by focusing on mobile money agents.
Nigeria’s central bank announced a partnership in January to implement new Know Your Customer (KYC) measures at Point of Sale (PoS) points. This initiative aims to prevent a recurrence of the over 10,098 fraud cases worth ₦1.95 billion ($2 million) recorded in the country last year. The upcoming feature will flag potentially fraudulent transactions, requiring PoS agents to conduct KYC measures before approving transactions.
In Ghana, a similar approach was adopted to address fraud in the $155 billion mobile money space. Mobile money agents were required to link their accounts to Tax Identification Numbers (TIN) or the Ghana card by February 1, 2024.
8. Big Tech Expansion: Google Establishes First African Cloud Center In January, amid discussions on how cloud computing impacts startup finances, Google launched its initial cloud region in Africa, extending its cloud services to South Africa. Google joined other major cloud providers like Microsoft Azure (2018), Amazon Web Services (AWS) (2020), and Alibaba Cloud (2019) in entering the South African market.
9. Advancements in Telecommunications: Egypt Approves First 5G License Egypt granted its first 5G license, becoming the latest African country to embrace this telecommunications advancement.
Over 12 African nations, including Nigeria, South Africa, Botswana, and Zimbabwe, have already introduced 5G. Egypt, having awarded its inaugural 5G license to state-owned Telecom Egypt at a cost of $150 million, commenced testing 5G services in five locations across the country, with plans for a full rollout later in 2024.
Source: TechCabal
