AFRICA’S venture capital activity is heating up as investor optimism in startup performance breathes new life into the lingering chill of a prolonged funding freeze.
“It’s because they’re seeing healthier numbers in a lot of these companies than they’re seeing in their own market,” Lexi Novitske, Norrsken22’s general partner told Bloomberg.
“I think investors will start coming back and investing with a lot more due diligence, hopefully, more concentrated positions where they’re much more involved in operations of companies and with a much more reasonable valuation.”
Last year, the African startup ecosystem experienced a notable funding drought, mirroring global economic downturns amid tighter financial conditions.
However, the recent activity from high-profile firms like TLcom Capital and Norrsken22 suggests a robust rebound may be underway.
TLcom Capital, a leading venture capital firm focused on technology-driven solutions in emerging markets, recently closed its second fund at an impressive US$154 million.
Now, Norrsken22, a US$205 million fund supported by unicorn investors, has announced plans to significantly increase its investments in the region on a projected fintech boom.
Norskenn22 has invested in six startups, including South Africa’s Tyme Group, and plans to expand its portfolio to 20 companies by the end of 2025, with three more investments currently in the pipeline.
Novitske, attributes renewed investor interest in the African startup sector to their impressive yield, especially in fintech where she anticipates a boom. MNT-Halan, Moove, M-KOPA and Husk Power are just some of the startups having an impressive run.
A report by the African Private Capital Association shows that while there was a significant dip in 2023 with a 31% decline in funding to US$4.5 billion, the early months of 2024 have painted a different picture.
Investors, both local and international, are re-engaging, driven by the compelling success metrics demonstrated by startups across the continent.
“This year has started off strong, with significant investment tickets being placed into African ventures. It appears that investors are increasingly convinced by the healthy figures they’re seeing compared to other markets,” Novitske noted.
This investor confidence is a boon for the continent’s tech and startup sectors, offering a much-needed reprieve and potentially laying the groundwork for a sustained period of growth.
Meanwhile, the resilience of Africa’s tech sector is also fostering a more diverse investment base.
Where previously funding was predominantly sourced from Western venture capitalists, there is now a growing interest from Middle Eastern and Asian investors, further diversifying the financial landscapes and providing more funding avenues for startups.
