Kenya Scores High On Startups Funding In Africa – Report

By Jean Pierre Afadhali

Kenya has become Africa’s largest startup funding destination after overtaking traditional giants Nigeria, South Africa and Egypt, despite 25 percent year on year decline in 2023.

The East Africa country’s startups raised $800m in 2023 making Kenya, the most popular hub for startups funding in Africa at 28 percent of the total, according to ‘Africa: The Big Deal’, a platform that curates financial deals from across the continent.

“Its share of Eastern Africa’s funding grew from 86 percent in 2022 to 91 percent in 2023. 93 start-ups raised $100k or more during the period (19% of Africa’s total),” noted Africa: The Big Deal in its latest report released earlier this week.

Maryanne Ochola, managing director at Endeavor Kenya, a global community of entrepreneurs explained in an interview with Pan African Visions that the drops in other regions [Nigeria, Egypt and South Africa] have been more significant leading to Kenya’s number one position.

The Nairobi number one position was also boosted by two mega deals from two energy firms, namely Sun King and M-KOPA. “It helps if your startups are not just accessing early stage deals which tend to be smaller,” Ochola further explained, adding that scaling up and attracting much larger later rounds and mega deals that are more than $100mn is important in startups investments and the country’s funding attraction status.

According to Africa: Big Deals, in Egypt, there were 48 ventures that raised $100k+ in 2023, the lowest number out of the Big Four.

“But thanks to a YoY decline (-20%) more moderate than Kenya and most importantly Nigeria, it was enough for the country to claim the second spot, “added Africa:  The Big deal.

The 2023 funding report reveals, Egypt’s share of North African funding grew substantially from 72 percent in 2022 to 95 percent in 2023 (by far the strongest progression), due both to the magnitude of MNT-Halan’s fundraising, and Algeria and Tunisia’s inability to repeat their strong 2022 performance.

Meanwhile, South Africa’s share of regional funding remains the highest at 97 percent. The 70 start-ups who raised $100k or more in the country cumulated $600m in funding i.e. 21 percent of the continent’s total.

South Africa was the only one of the Big Four not to see its total funding shrink between 2022 and 2023 (+8% YoY), noted the startup funding report.

However, Nigeria is the country where the most dramatic change happened in 2023.  “While the country still claimed the highest number of start-ups to raise $100k or more (146, 29% of the continent), the amount they raised was divided by 3 YoY (-67%) to reach $410m, compared to $1.2b in 2022, and $1.7b in 2021.”

As a result, its share of Western African funding continued to drop to reach 68 percent, down from 85 percent in 2021, and 77 percent in 2022, revealed the 2023 report.

“This is the lowest regional share of any Big Four market since we started collecting the data in 2019,” stated the deals curators.

Even though it represents only 13 percent of the funding, there is a wealth of activity beyond the Big Four, stated the continent’s startup investment platform. “Encouragingly, 29 percent of the start-ups who raised $100k or more in 2023 were located outside the Big Four.”

Despite Kenya’s funding attraction and number one position in 2023, a number of startups gone out of business last year amid concerns over the country’s ecosystem.

Ochola stated that in terms of startups failures in Kenya, “its embedded in the VC model that majority of ventures do not succeed and VC firms are making bets with the understanding that a few companies will make the return for the fund.”

The Africa entrepreneurship expert added it is normal for startups to close down but “it appears a lot more conspicuous for us [Kenya] because we are a young ecosystem.”