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Africa seems defiant. After the startups raised $3 billion in 2016, The decline in global venture capital funding in the first half of 2022 will double the amount received in the same period last year. However, the correction of the VC market was linked to the continent in the middle of last year, when the amount of tickets decreased and investors tightened their wallets, a few deals were closed.
VCs predict that the current financial slowdown in Africa will continue into 2023, as investors continue to pull back, making it difficult for new and existing startups to raise capital.
My 2023 prediction is that things will get worse before they get better – declines, layoffs, closures and turnover will continue to increase in the African startup ecosystem. Abel Borreto, Novastar Ventures
“With the global economic slowdown towards 2023 due to inflation and monetary policy, investors on the continent will continue to take a more equivocal approach to investment and African startups will continue to find fundraising challenging,” he said. Seedstars Africa Ventures.
As a knock-on effect, the operating environment for startups is expected to worsen this year, continuing the trend toward increased layoffs, declines in activity and bridge rounds, and business closures through late 2022.
Mega-rounds are also expected to be few and far between, as seen in the last half of 2022, when no deals worth more than $100 million were signed, according to The Big Deal, a database of publicly traded deals. In total, six mega-rounds were closed last year (all in the first six months), with half of such deals closed in 2021, when VCs raised record amounts.
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