VC funding in African tech start-up declining: What next for ecosystem?

The African tech start-up ecosystem is experiencing a decline in venture capital funding in 2023, raising concerns about the sector's future growth prospects. Pascal Murasira, Managing Director for Norrsken East Africa, shed light on the current state of affairs in a recent CNBC Africa interview. Murasira highlighted that the decrease in VC funding is not unique to Africa but is part of a global trend known as a 'funding winter.' This trend is attributed to various macroeconomic conditions and factors, such as high interest rates, impacting investments in start-ups worldwide. Despite the overall reduction in funding volume, certain sectors like climate tech have garnered significant interest from both African and global investors. Fintech, another traditionally attractive area for capital infusion, continues to receive funding, albeit not at the same levels as in previous years. Murasira emphasized that Africa remains a lucrative opportunity for investors willing to navigate and understand its dynamic market landscape. To adapt to the changing financial environment, start-up companies are increasingly focusing on cost-efficiency and revising their business models to prioritize cash flow. This shift towards financial prudence is seen as a positive development, as it encourages start-ups to operate more sustainably and attract capital when market conditions improve. Norrsken East Africa, under Murasira's guidance, advocates for start-ups to adopt lean practices and strategic operations to enhance their investment viability. Despite the challenges posed by the current macroeconomic climate, Norrsken has actively raised capital, positioning itself to support efficient and scalable start-ups in the future. One critical area of concern within the African start-up ecosystem is the underrepresentation of female-led businesses in investment portfolios. Female entrepreneurs in 2022 received significantly less funding compared to their male counterparts, highlighting an imbalance in investment opportunities. Norrsken has initiated programs to support and empower women entrepreneurs, aiming to bridge the funding gap and facilitate their access to capital. Events like Norrsken Africa Week serve as platforms to showcase and promote women-led businesses, fostering visibility and connectivity with potential investors. Murasira stressed the importance of elevating women entrepreneurs as role models to inspire future generations and dispel investor apprehensions about backing women-led ventures. By championing diversity and inclusivity in the tech start-up space, Norrsken is committed to nurturing a vibrant entrepreneurial ecosystem that thrives on innovation and equitable investment practices.