The Resilience of African Tech Amid Global Downturns
The African technology space has been making waves in the global investment community due to its remarkable resilience in the face of economic downturns. Its still relatively young status and the vast scope of untapped potential on the continent contribute to this resilience. The eighth edition of the annual African Tech Startups Funding Report published by startup news and research platform Disrupt Africa provides insightful data into this promising landscape. The report revealed that the year 2022 saw an unprecedented $3.33 billion raised by a total of 633 African tech startups.
In an era marked by worldwide economic contraction, such growth seems improbable. However, Philip Gasaatura from Katapult Africa, an investor in the African tech scene, presents a plausible explanation for this trend. Firstly, Africa’s tech sector is still in its infancy and thus has the potential for robust growth. Secondly, there are several compelling facets within the sector that make it an attractive proposition for global investors.
Despite the sector’s current size compared to the rest of the world, Gasaatura maintains that the opportunity Africa offers over the coming decades is enormous. This belief is rooted in the ongoing demographic shift, rapid urbanization, and the widespread adoption of technology. The sector’s promise lies not just in resolving present-day challenges but also in its potential to address the problems of tomorrow.
Observations, Predictions and Challenges Ahead
Disrupt Africa’s podcast series, “The month in VC,” sheds further light on the dynamics of the African tech ecosystem. In the first episode of this series, Catherine Young, managing director of Grindstone Ventures and Grindstone Accelerator, echoed Gasaatura’s optimism. She predicted that Africa would continue to defy global trends while laying a solid foundation for future growth.
However, Gasaatura anticipates that the journey through 2023 will present a formidable challenge. The companies that manage to survive and thrive in this period will likely be those that maintain a relentless focus on their customers and on generating cash flow. Despite the obstacles, Gasaatura is upbeat about investment opportunities in this timeframe.
The report revealed a substantial rise in disclosed investors in African tech startups in 2022, up 28% from 2021. This diverse group of investors ranged from early-stage funds like Launch Africa Ventures, LoftyInc Capital Management, and Future Africa to globally renowned investors such as Tiger Global, Sequoia Capital, and SoftBank.
Another heartening trend highlighted by the report is the progressive diversification in funding. A growing proportion of investments are being channeled into markets outside the traditional “big four” of Nigeria, Kenya, South Africa, and Egypt. Gasaatura views this as an encouraging sign of opportunity spreading across the continent.
A noteworthy revelation from the report is the increasingly prominent role of accelerator and incubation programs in supporting startups. Over half of the funded African tech startups in 2022 participated in such programs either prior to or as part of their fundraising efforts. This marked a significant increase from 2021. These programs, Gasaatura argues, provide valuable insights into growth strategies and investment thinking.
The Gender Issue in African Tech Investment
Despite these encouraging trends, a significant problem lingers in the African tech scene: the glaring gender imbalance. Only 20.2% of the funded African tech startups in 2022 had at least one female founder, representing a decline from 21.5% in 2021. This lack of diversity is particularly disappointing, given the widespread acknowledgment of the benefits of having a diverse portfolio of investments.
Addressing this imbalance, Young criticized common excuses such as insufficient or poor-quality pipeline, startups being in too early a stage, or the lack of the right skills. In her experience, neither the quality nor the quantity of female founders is the issue. Young’s initiative, Grindstone Accelerator, partnered with Naspers Labs to launch GrindstoneX, an all-female accelerator program designed to enhance the investment-readiness, scalability, and exit readiness of women-led startups.
The problem, she asserts, requires an intentional and sustained effort over a significant period. This includes ensuring more balanced investment committees and engaging more female mentors and coaches. After all, a more balanced and diverse investment landscape would ultimately result in more profitable and lucrative outcomes. And, as Young succinctly puts it, there’s no problem with that.
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