Kenyan startups have raised the most funding of any African country from January to June this year. This surge in capital inflow is a continuation of an impressive trend that began in 2023 and comes as the East African nation grapples with political unrest.
According to Intelpoint, Kenyan startups raised $200 million in the first half of the year and accounted for 17.9% of the startups represented; only Egypt had more startup representation.
This sustained momentum from 2023 demonstrates increasing investor confidence in Kenyan startups, solidifying the country's position as a hub for innovation and entrepreneurship in Africa.
"Kenya has good fundamentals currently and access to East African communities which is good for scaling," Oke Ekpagha, Senior Investment Analyst at Oui Capital says. "When you compare the regional blocks, you’ll find a more integrated region in the East. With this, there’s a possibility of building a sticky and highly scalable product compared to the West African region," she adds.
Nieros Oyegun Soerensen, Partner and Chief Operating Officer at Verod Capital, points out that the growth in funding for Kenyan startups over the past year has been driven by debt funding to startups in the energy industries while large deals also skew the data. For example, only two startups — M-Kopa and Spiro — collectively raised $101 million in debt funding.
Beyond this, the top funding destinations remained the same, with Nigeria, Egypt, and South Africa completing the top four spots. All four countries raised a combined $488 million.
With $581 million raised so far, funding for African startups fell 61% year-on-year. This time last year, startups on the continent had crossed the billion-dollar mark, having raised $1.47 billion. March was the standout month of H1 2024, thanks largely to Moove’s $100 million funding.
Later-stage investing gets more attractive
Early-stage startups have often raised more capital from investors, but that trend is slowing. Series B and Series A rounds were responsible for 33% of the funding raised in H1.
DXwand, Roam, RemotePass, BRKZ, Youverify, Pula, and Sunculture are just a few startups that raised Series A and B rounds.
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Ekpagha explains that this trend is driven by a change in investor’s demands. Where speedy growth was valued even to the detriment of profitability, investors now require proof of positive unit economics in the early stages.
"Later-stage startups have larger funding needs because of the stage of their development and the scale of the growth they’re trying to access. It’s only natural they’ll receive the bulk of the funding, especially in the current climate. With growth stage companies, there’s more assurance of their growth since they have weathered more storms."
While existing startups have found a way to redirect their priorities, it would appear that younger startups still struggle with building businesses with positive unit economics.
Startup spotlight: Remotelli
By 2050, Africa will be the youngest region in the world, with 850 million youths constituting not just the bulk of the world’s population but also its workforce. On the one hand, that’s an exciting opportunity, but when the pace of economic growth on the continent is considered, it presents a gloomy picture.
At least ten million African youths get into the workforce each year, but only three million get a job. Remotelli, founded by British-Ghanaian entrepreneur Samuel Brooksworth, wants to help create jobs for a million youths on the continent.
In February, it raised $314,824 in a pre-seed round led by Bayer Leverkusen right-back Jeremie Frimpong to scale its operations across Africa.
Per its website, the startup has a talent pool of more than 7,000 professionals across marketing, finance, graphics design, software development, customer service, and sales. From as low as $642, organisations can hire talents on Remotelli within 14 days.
The mismatch between jobs being created and the number of youth entering the workforce suggests there’s a gap to be filled, but building a business in this space is fraught with numerous challenges.
Andela, one of the earliest players in the space, places technical talent in roles at organisations across the world. But where it began with a focus on entry-level talent, it has since pivoted to focus on more senior employees as demand for junior technical talent slows.
Remotelli's broader scope and job placement approach make it stand out from competitors like AltSchool Africa and Gebeya, which initially focused on technical talent.
However, this model poses challenges, particularly in finding skilled entry-level talent, given Africa's underdeveloped educational systems. Moreover, its job placement track record is modest, with only 100 successful placements, representing a mere 1.4% of its talent pool, raising concerns about its scalability and impact.
It also faces threats from the increased use of artificial intelligence in the workplace, potentially reducing the number of entry-level hires made by organisations. It also provides talent with an office space to work, increasing its operating costs.
Mobility startups lead the way
Fintech’s share of the funding pie continues to drop. They raised $142.5 million in the first half of the year, but mobility startups, led by Moove's $100 million Series B, top the charts with $147 million.
Other mobility startups that raised capital in the period under review include Rwanda-based EV player Ampersand and South African car subscription startup Planet42.
Two are better than one
Startups with at least two founders continue to attract most of the capital (72%). The synergy and diverse skill sets offered by multi-founder teams appear to be compelling factors for investors, who perceive such teams as better equipped to navigate the complexities of scaling a startup.
With funding prospects remaining bleak in the near future, Soerensen advises founders to reassess their funding requirements and secure sufficient capital to avoid relying heavily on bridge funding.
"Given the extended time from seed to Series A to Series B on the continent compared to other emerging markets, companies must be prepared for a longer development cycle. Founders should focus on achieving milestones conservatively and strategically to attract necessary funding," she warns.
