Startup investors signed more cheques for Kenyan founders than Nigerian counterparts in 2024. For the second year running, East Africa attracted the most funding on the continent ($725 million), with Kenya responsible for 88 percent ($638 million) of the region’s raise, according to ‘Africa: The Big Deal.’
The data insight firm, which tracks startup funding of $100,000 and above, revealed that startups in Africa raised $2.2 billion in equity, grants and exits in 2024, a 25 percent decline from the $2.9 billion garnered in 2023 and a 53 percent slump from $4.6 billion raised in 2022.
Nigeria attracted $410 million in 2024, a big chunk of the $587 million raised in West Africa. The firm noted that 188 African ventures raised $1 million or more in 2024 (excluding exits), 10 percent less than in 2023.
Much of the raise in 2024 was in the second half of the year, with the first half recording a sharp decline. “Overall, start-ups in Africa have raised $780 million (excl. exits). This represents a 31 percent drop compared to H2 2023, and an even starker 57 percent decline compared to H1 2023 if we want to account for seasonality,” said Africa: The Big Deal in June.
The rebound in the later part of the year saw startups raise $1.4 billion, making it the second-best semester since the beginning of the ‘funding winter’ in mid-2022. These numbers were partly driven by the two mega deals of Moniepoint and Tyme Group in the fourth quarter (Q4), which became unicorns in the process.
A further analysis of the funding details for 2024 revealed that Egypt raised $400 million, but financing to Northern Africa fell 22 percent to $478 million. South Africa raised $394 million, with funding to its region falling 18 percent to $397 million.
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As usual, the Big Four -Kenya, Nigeria, Egypt, and South Africa – attracted 84 percent of all start-up funding (excluding exits).
Francis Vesta, investment associate at Madica, explained that the decline in African startup funding reflects broader global economic trends, including rising interest rates and tightened venture capital markets.
“Specific industries may have begun to be less attractive for investors due to a combination of factors such as the spending power of end users (heightened by inflation) and alternatives, among others,” he said.
Davidson Oturu, general partner at Nubia Capital, a US-based venture capital firm, noted that 2024 was a slow year for startups because of a funding correction.
“Funding to Africa generally has dropped after the high of 2022, and what we are seeing could be a correction of the system where valuations are now more pragmatic, and investors are not willing to put money into just any sort of startup but are looking for those providing real services and can deliver good returns,” he said.
Read also: Top 10 African startups that raised the most funding in 2024
One investor highlighted that investors are now biased towards sustainable startup models generating revenues.
The decline of startup funding to Nigeria, which has dominated the continent for a while, underscores broader issues, industry experts noted. For instance, Kenya overtook Nigeria as the country that got the highest private equity deals in Africa in 2023, according to a report by DealMakers Africa.
A report by Stears outlined that Nigeria struggled to attract only 23 percent of investments in the third quarter of 2024 as private capital found its way to South Africa and Kenya. “South Africa and Kenya were standout performers, each accounting for a third of all private market deals in Q3,” the report read.
Oturu noted that Nigeria’s struggles are linked to structural and economic factors.
“Nigeria faces persistent challenges with its ease of doing business, ranking 131st globally in the World Bank’s most recent report. The Naira’s significant depreciation in 2024—trading at record lows—heightened exchange rate volatility and could have discouraged foreign investors,” he stated.
He noted that policy inconsistencies, such as abrupt changes in fiscal or regulatory frameworks, have created uncertainty for startups and investors alike. “For Nigeria to regain its position, it must address these bottlenecks and create a more predictable and investor-friendly environment,” he added.