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Diversify Kenya’s tech ecosystem
Delegates and exhibitors during the inaugural 2019 Afro-Asia Fintech Festival hosted by The Central Bank of Kenya (CBK) and the Monetary Authority of Singapore (MAS) at the Kenya School of Monetary Studies on July 15, 2019.
Disrupt Africa, a publication that tracks the growth of the African tech ecosystem from a funding perspective, reveals that the region experienced growth, diversity, and challenges.
The African Tech Startups Funding Report 2023 shows that African startups raised a total of $2,406,914,000. This figure represents a decline compared to previous years, marking the first time since 2016 that total funding has not grown by 40 percent or more.
The funding decrease reflects broader global trends of a "capital shortage" and a "funding winter." To provide context, the total funding raised in 2022 was notably higher, with a record amount secured by startups across the continent.
The decline in 2023 indicates the challenges faced by the tech ecosystem, as funded ventures also fell, with 406 startups securing funding compared to previous years' higher numbers.
However, despite this downturn, 2023 still ranks as the third-best year on record in terms of the number of funded ventures and the total capital secured. This resilience, although a significant regression from the growth trajectory observed in earlier years, is a testament to the strength of the African tech ecosystem.
The overall decline in funding of African startups pushed Nigeria from being the top country in terms of total funding to fourth place, behind Kenya, Egypt, and South Africa. This illustrates a significant downturn, contrasting sharply with the growth seen in previous years, and highlights the need for adaptation and resilience among startups in the face of economic headwinds.
Two sectors; fintech and agritech, dominate the funding in Africa. Fintech stands out as the most popular sector, with 128 startups securing financing, which accounts for 31.5 percent of all funded startups in Africa.
Despite its prominence, fintech experienced a decline in the number of startups receiving funding and the total amount raised compared to previous years. In agritech, 24 startups raised funding, marking a slight increase from the previous year.
However, this sector also faced challenges, as total funding declined in 2023, representing the first downturn after several years of consistent growth. The growth was uneven across sectors. These sectors illustrate the dynamic nature of the African tech landscape and highlight the ongoing challenges and opportunities that startups face in the region.
Other sectors attracting significant funding included e-commerce, e-health, and logistics startups, all of which have seen considerable funding, reflecting the shift towards online shopping and digital retail solutions. These investments highlight the importance of e-commerce for trade and customer experiences while also emphasising the need for efficient supply chain solutions.
The report seeks to highlight trends in key markets and sectors, analyse the composition of founder teams regarding gender and nationality, and examine the job creation potential of funded ventures.
By compiling and presenting this data, the report serves as a valuable resource for entrepreneurs, investors, and stakeholders, helping them to understand the dynamics of the African tech landscape and informing their fundraising strategies. This open-source report ensures that the insights and data can benefit African startup founders.
The report's release coincides with new efforts by the Government of Kenya to foster tech innovation in the country. The government has already produced a new organisational structure with several top Information and Communication Technology experts to function as intermediaries between local tech entrepreneurs and policy and regulation.
Intermediation, such as industry associations, hubs, accelerators, and incubators, can play a vital role in facilitating dialogue and collaboration among stakeholders and minimising contentious innovation and regulatory frictions, especially with emerging technologies.
Despite a decrease in the number of startups receiving investment, the increase in total funding underscores the potential for growth and the significant contributions from key sectors such as energy and fintech.
This scenario illustrates that while the funding landscape may be contracting in terms of deals, the quality and size of investments in some areas, but certain sectors remain strong, positioning Kenya favourably within the African tech ecosystem.
The report suggests that there is a need for more diversification and innovation in the African tech landscape, as well as more support and collaboration from various stakeholders, to foster a more resilient and sustainable sector.
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