According to the latest report released by the African Private Capital Association (AVCA), Africa recorded a $1.4 billion decline in venture capital deals in the first six months of 2023 as global investors pulled out of big-ticket funding rounds. The report shows that every investment stage suffered severe contractions by both volume and value, with only 263 VC deals completed in the continent’s venture ecosystem, allocating a total of $2.1 billion worth of capital to 258 unique companies. This translates to a 40% drop by both volume and value, compared with the $3.5 billion raised in the same period last year.

The report titled Africa in the Global Context: Another Lean Year for Venture Capital, shows investors are now applying a more judicious approach to investment in Africa, although they are still actively allocating capital to start-ups with strong fundamentals. The report, however, notes that although the number of start-ups concluding deals with a value of $100 million or more fell, the proportion of overall funding assumed by these high-profile funding rounds in each quarter remained largely consistent with the historical average. Notably, AVCA notes that funding challenged began in the third quarter of 2022, mainly as result of the global macroeconomic downturn.

Regarding regional dominance, West Africa attracted the highest overall volume of VC deals in Africa in the first half of 2023, taking up 31% of the deals, followed by East Africa (22%), North Africa (20%) and Southern Africa (20 percent). As to sectoral performance, the financial sector dominated the venture capital activities during the period, taking up 26% of the deals, followed by IT (20%), consumer discretionary (15%), industrials (9%), healthcare (9%) and communication services (6% ).