Report Indicates 2,500 Employees Laid Off in 2023 Across African Startups
The slowdown in funding into the African startup space led to the layoff of over 2,500 employees in 2023, Briter Bridges has disclosed.
In the report titled ‘Africa 2023 Investment Report: Crisis or adjustment?’, the data intelligence firm argued that despite the slowdown in funding, the continent’s tech ecosystem was undergoing a reconfiguration rather than a crisis.
It said, “We may be observing a process of reconfiguration or adjustment, which comes as a consequence of the two cash-abundant years that followed Covid-19, during which valuations skyrocketed and the high liquidity emanate that investors had to compete for ever more expensive deals.
“This process arguably created a generation of overpriced businesses which struggled to find an equally bullish investor market as soon as the tide turned and capital became less available and more expensive. The result? Many stagnated or were forced to downsize or shut down.”
Last year, the number of startups that shut down or reduced their growth trajectory increased due to a contraction in investment volumes, further stated.
The startups included Twiga Foods, Copia, Cellulant, Jumia, Wave, Marketforce, and Renmoney.
Other startups that shut down in 2023 included Okadabooks, Vibra, Pivo, Lazerpay, 54gene, Hytch, among others.
Also, dozens of firms either declared bankruptcy or sought asset sale to other startups, the data intelligence firm noted. In 2023, startups on the continent raised $4bn, 23.08 per cent lower than the $5.2bn they raised in 2022, Briter Bridges revealed.
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There were 1,080 plus funding deals in 2023, an 11 per cent increase from the 975 there were in 2022.
The firm stated that deal activity in 2023 remained stable and well above pre-Covid volumes, with the majority of disclosed investments happening at the pre-seed, accelerator, and early stage.
It noted, “This was influenced by the rise of several new vehicles. Both international accelerators such as Techstars and 500 Global and Africa-focused Founders Factory Africa and Flat6Labs remained active with fresh capital raised to fund large cohorts.”
Overseas funding remained crucial to startups, especially those in their late stage. Nigeria was not the major destination for startup funding in 2023. Kenya was the hotspot for funding, attracting $806m, followed by Egypt ($675m), Nigeria ($575m), and South Africa ($565m).
Nigeria continues to be the leader in terms of total funding raised since 2014 though. The firm revealed that Nigerian startups had raised over $6bn between 2014 and 2023.
Kenyan startups have raised over $5bn, Egyptian startups have done over $2bn, and Rwandan startups have raised over $800m.
“Debt financing has begun adopted by investors as one of the go-to instruments to fund companies that present proven business models and the ability to repay their debt through revenues,” Briter Bridges said.
Commenting on sectoral diversification of funding, the firm highlighted that while fintech captured about 25 per cent of deals, others such as health and biotech, climate and cleantech, and logistics are also on the ascendency.
Generally, 2023 was a relatively bad year for startups. In its funding analysis, Africa: The Big Deal, a data insight firm that tracks startup funding of 100k and above, disclosed that funding into Africa declined by 39 per cent to $2.9bn in 2023.
