Africa’s venture capital landscape has experienced significant fluctuations in recent years. Investments in African startups soared from $1.3 billion to $4 billion between 2019 and 2021, fueled by global interest and low interest rates. However, in 2023, investments plummeted to $2.27 billion, resembling pre-2016 levels, according to insights shared by Eghosa Omoigui from EchoVC.
As the funding environment evolves, African startups and investors face a myriad of challenges. Dr. Eleni Z. Gabre-Madhin, Founder of Timbuktoo Africa and former Chief Innovation Officer at UNDP, offers valuable perspectives on navigating these challenges while underscoring 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 venture capital 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. She asserts, “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 on, startups can hedge against country-level issues and enhance their attractiveness to investors.