For the first time in almost a decade of consistently strong growth, the number of venture capital deals in Africa decreased by 31% YoY, according to the African Private Capital Association 2023 Venture Capital in Africa Report.

The number of deals was only 545 last year from the record-setting 787 deals struck in 2022. Added to the global downward trend of venture capital, investors faced currency volatility and continued high inflation in Africa, prompting investors to back prospects in portfolio companies with an established track record rather than new ventures. 

According to AVCA, 2023 was a year of significant socio-political and economic upheaval, which led to a global funding winter that saw investors prioritise safer assets rather than VC investments,

The global VC ecosystem has seen a steady global decline since 2022, falling to $285bn in deal value last year, compared to $690bn in 2021. 

The cumulative effect is a market size that represents 41% of capital invested in 2021, signifying a contraction of venture funding around the globe in 2023.

However, while the value of the capital that was channelled into the ecosystem changed amidst the uncertainty, the distribution of this capital remained largely consistent with historical findings. Investors may be writing smaller cheques, but they’re doing so along the same lines as previous years. 

Paradigm Shifts and Evolving Trends

Trends that Held Firm

• Gender diverse and female funded startups still lag behind their male counterparts – they accrued 27% of deal volume but just 13% of deal value for the year.
• Despite the reduced presence of (particularly global) investors, Fund Managers, Investment Firms and Corporate Venture Capital remained the three most prominent investor types.

Abi Mustapha-Maduakor, Chief Executive Officer, AVCA, said: “Despite a challenging macroeconomic environment, Africa remains an important region for venture capital investors, reflected by strong participation in deals across various sectors and geographies. As digital transformation decentralises systems, boosts efficiency, and helps provide new talent, Africa's Fintech and IT sectors have attracted the most investment. While climate action evolves as a critical focus driving capital towards the energy transition, food systems and beyond - investors crowd around opportunities in Clean and ClimateTech. As these trends persist, Africa's investment community maintains a profound commitment to the region's growth despite the uncertainty in the global economy."