From funding worth $2.4 billion to the creation of the Nigeria startup portal and the implementation of AI strategies for startups, there is optimism for startups’ performance in the new year. Here are some predictions for startups in the new year.
The year 2023 saw many startups fold up and some others get acquired by bigger players in the industry. The likes of Payday were acquired by BitMama.
Startups like Pivo, 54Gene, and many others threw in the towel, making up the $79.15 million in funding that investors would not be making any returns from. These closures and acquisitions are not ending soon, as some other startups are still predicted to close up.
“More startups would die from a combination of incompetence, bad governance, or just running out of cash. Many young people who started startups as a means out of poverty will be shocked to find out that it’s not that easy,” Adedeji Olowe, founder of Lendsqr, a cloud-based lending platform, said.
He went on to say that the era of “grow while burning cash” is gone.
“Raising funds would still be a lot because investors are now focused on sustainable businesses. With the death of startups and less money around to raise, this year would have a significantly lower number of new startups and with many startups dying, banks and telcos may see an influx of talent that now prefer stable businesses.
“Older and experienced founders would now be courted as they are solving problems and not looking for sustenance. Most importantly, they have what these young guys don’t have – experience, industry connection and leverage,” he added.
On the venture capital scene, it is predicted that investments will do well this year, despite the significant decline the venture capital (VC) market experienced last year.
According to Ola Brown, founder of HealthCap Africa, “I think that this is the best time to invest in startups. Some of the largest tech companies in the world, such as Apple, WhatsApp, Slack, Microsoft, Amazon, and Uber, were born during “venture capital winters.”
These companies demonstrate that successful technology firms can emerge and flourish even during challenging economic periods. As the funding winter persists, tech valuations are anticipated to hit historic lows, presenting an enticing opportunity for investors driven by value.
She also noted that despite the popularity of these investments, interest rates will be high. “I project that interest rates will remain high. This will continue to drive valuations downward, making it an exciting time for value investors to invest,” she added.
However, these investors are becoming more conscious about due diligence, thereby creating an environment where sturdy founders and thoughtful investors can come together.
In a conversation with Teriba Ayobamigbe, an investment professional across the Sub-Saharan Africa technology ecosystem, he revealed that many high-scale startups will begin to tilt towards the acquisition of their IPOs. He also said that there will be a trend of veteran startup founders as against the crop of young founders available today.
“Founders will be judged by their previous work as investors will tilt from emotions to evaluations. It will be a process of validation, evaluation and revalidation,” he said.
Ultimately, the success of many of these startups will be determined by the steps founders take as well as the policies CBN makes which can, most times, affect their operations.
