In recent years, Africa’s venture capital scene has experienced significant fluctuations. Investments in African startups soared from $1.3 billion to $4 billion between 2019 and 2021, driven by global interest and low interest rates. However, 2023 saw a decline to $2.27 billion, reverting to pre-2016 levels, as noted by Eghosa Omoigui from EchoVC.
As the funding landscape shifts, African startups and investors are confronting numerous challenges. Dr. Eleni Z. Gabre-Madhin, Founder of Timbuktoo Africa and former Chief Innovation Officer at UNDP, emphasizes the critical role of venture capital in Africa’s tech ecosystem and offers strategies for navigating these challenges.
Dr. Gabre-Madhin underscores the necessity of developing 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 advocates for greater collaboration between governments and institutional investors to strengthen domestic VC activity and protect against external economic shocks.
For long-term success, Dr. Gabre-Madhin recommends a multi-country approach for tech startups. She advises, “One of the most important initiatives… is to mitigate single-country risk by going across borders as soon as possible.” By expanding into multiple markets early, startups can reduce country-specific risks and become more attractive to investors.