Africa seemed to resist After startups have raised $3 billion, the decline in global venture capital in the first half of 2022 is double what was secured in a similar period last year. But the VC market correction caught up with the continent late last year, with ticket sizes shrinking and fewer deals closed as investors tightened their purse strings.
VCs now forecast that the slowdown in funding in Africa will continue into 2023. Investors continue to pull out, making it harder for new and existing startups to raise capital.
“My prediction for 2023 is that things will get worse before they get better. Down rounds, layoffs, closures and bridge rounds will continue to increase in the African startup ecosystem.” Novastar Ventures, Abel Boreto
“As inflationary pressures and tighter monetary policy continue to slow the global economy through 2023, continental investors will maintain a prudent approach to investing and African start-ups will continue to find financing difficult. I would,” said Bruce Nsereko-Lule of Seedstars Africa Ventures.
The knock-on effect is that the operating environment for startups has worsened this year, leading to a surge in layoffs, curtailed activity, down and bridge rounds, and business closures, which is expected to continue the trend that picked up at the end of 2022.
Mega rounds are also expected to fall short, as was the case in late 2022 when deals over $100 million were not signed, according to Big Deal, a database of publicly disclosed deals. Overall, six mega rounds closed last year (all in his first six months), and half of such deals closed in his 2021, when VCs invested record amounts.
