Babs Ogundeyi, Group CEO and Founder of Kuda Technologies, discusses the continent’s funding potential and opportunities for a growing tech-savvy population.
In recent times, investor confidence in Africa has taken a significant hit, mirroring the broader global economic slowdown. Once an attractive destination for venture capital (VC), the continent has seen a sharp decline in funding — with start-up investments falling by over 50 percent in the past three quarters compared to the previous year. The recent decline in funding, coupled with the setbacks faced by some high-profile start-ups, has fuelled apprehension among investors and raised concerns about the future of African innovation and entrepreneurship.
Just three years ago, Africa was at the forefront of the global VC landscape. Investors from all corners of the world were pouring money into promising start-ups across the continent, recognising the untapped potential of its young, tech-savvy population and rapidly growing digital economy.
However, as the global economy has shifted gears, becoming more cautious and uncertain, so too has investor sentiment towards emerging markets. Africa, with its inherent risks and challenges, has inevitably been affected by this shift — and recent shutdowns of well-funded start-ups have further heightened concerns.
Despite these setbacks, Africa remains a compelling investment destination, with a wealth of opportunities that far outweigh the perceived risks. The continent’s young and rapidly growing tech-savvy population presents an unparalleled prospect for businesses that cater to this underserved market. Additionally, Africa is a hotbed of entrepreneurial activity, with a growing number of individuals and organisations driving innovation and addressing the continent’s unique challenges and needs. This entrepreneurial spirit is fuelling the development of innovative solutions that can potentially transform various sectors across the continent.
ADAPTING TO A CHANGING INVESTMENT LANDSCAPE
While the recent decline in VC funding is concerning, it is also a natural consequence of a more cautious global investment landscape. Investors exercise prudence, evaluate their risk appetites, and focus on companies with solid fundamentals and viable business models. This shift in focus is not unique to Africa – it is a global trend.
Start-ups in Africa, like their counterparts in other regions, need to adapt to this changing investment landscape. While funding is still available, it is becoming more selective, demanding a higher proof of concept and a clear path to profitability. Start-ups must focus on building a strong product that addresses real customer needs and demonstrating a sustainable business model that can withstand economic downturns.
The recent shutdowns of well-funded start-ups should not be seen as a sign of the continent’s overall decline, but simply as a reminder that the entrepreneurial landscape is competitive and not all businesses will succeed. However, the fact that these failures were met with relative calm and no widespread panic reflects the increasing maturity of Africa’s start-up ecosystem.
AFRICA’S UNSUSTAINABLE GROWTH POTENTIAL
In uncertain times, it’s natural for investors to exercise caution. However, this should not translate into a complete withdrawal from Africa. Investors should look past the short-term headwinds and focus on the continent’s long-term opportunities.
Africa’s rapid adoption of mobile technology and internet connectivity has paved the way for a thriving digital economy. This digital transformation enables innovative start-ups to emerge and disrupt traditional industries, creating new business models and market opportunities.
It is also essential to recognise that the continent’s challenges are not insurmountable. The infrastructure gap, for example, while a significant hurdle, also presents an opportunity for innovative solutions. Governments across the continent are also playing an increasingly important role in supporting entrepreneurship and fostering a conducive environment for start-ups to thrive. Initiatives such as regulatory reforms, investment promotion programmes, and access to financing are helping to create a more supportive ecosystem for entrepreneurs.
While investors adopt a more selective approach, they should not abandon Africa altogether. Instead, they should focus on identifying and supporting start-ups that demonstrate strong fundamentals, a clear roadmap for success, and the ability to address the continent’s unique challenges and needs. On the other hand, start-ups should not be discouraged by the recent funding slowdown, but focus on building solid foundations, developing viable business models, and demonstrating their ability to deliver value to customers.
LOOKING AHEAD
Despite recent global economic fluctuations and start-up challenges, Africa’s long-term investment potential remains undiminished. The continent’s underlying strengths, coupled with the resilience of its people and the increasing maturity of its start-up ecosystem, provide a solid foundation for sustainable growth and investment opportunities.
As Africa continues to navigate the current economic uncertainty, it is well-positioned to emerge as a key driver of global growth, creating immense opportunities for investors with a long-term perspective. The continent’s promise and prosperity are brighter than ever – and its future remains full of exciting possibilities.
