Recent years have been a rollercoaster for Africa’s venture capital scene. Investments in African startups surged from $1.3 billion to $4 billion between 2019 and 2021.
This was due to global interest and low interest rates. However, in 2023, investments dropped to $2.27 billion, similar to pre-2016 levels. Eghosa Omoigui from EchoVC shared this insight.
As the funding environment undergoes a transformation, African startups and investors are facing a myriad of challenges. Dr. Eleni Z. Gabre-Madhin, Founder of Timbuktoo Africa and former Chief Innovation Officer at UNDP, offers insights into navigating these challenges while centering the discussion on the critical role of venture capital in Africa’s tech ecosystem.
Dr. Gabre-Madhin emphasizes the urgency of building a robust domestic investment base to sustain VC inflows, stating, “The most important structural issue is that the base of venture capital in Africa is almost entirely foreign investment.” She highlights the need for collaboration between governments and institutional investors to bolster domestic VC activity and safeguard against external shocks.
To attract and retain venture capital investment in the long term, Dr. Gabre-Madhin advocates for a multi-country approach for tech startups. “One of the most important initiatives… is to mitigate single-country risk by going across borders as soon as possible,” she asserts. By expanding into multiple markets early on, startups can hedge against country-level issues and enhance their attractiveness to investors.
