Rooibos Radar Live: Insights from Our First Discussion on African Tech Investment
A closer look at Q1 Investment Trends in Africa
We kicked off our first Rooibos Radar Live discussion with a bang! Big thanks to our first 3 guests. 🔥
Investments Trend
African startups raised $466 million in Q1 2024, a significant 27% quarter-over-quarter (QoQ) and a 47% year-over-year (YoY) drop in funding. This decline prompted us to ask the question: Why? This became the focus of our discussion today and here are some key insights that came up:
Western Dominance: Western companies are well established with proven business models and abudant funding. With the rest of the world chartering Africa, Asia, and the Middle East as the next big wave of tech, these companies are flocking in their numbers. And the small African startups cannot compete. However, one thing that African entrepreneurs have is knowledge of the African context and this calls for partnerships. One big partnership to envy is one that Strive Masiyiwa with Liquid Intelligent Technologies is developing with the likes of Google, Microsoft, and Google to bring internet to the corners of the continent.
While on the West, it is also important to note the overreliance we have on them for investments. As the financial tides in the West turn those effects are also felt in Africa. And that is one explanation for the dip in investments in 2024 on the continent which is inline with the dip in investments experienced in the West while being at the verge of a recession.
Misplaced Priorities: Many African startups emulate Western models without addressing the unique challenges of their local contexts. We have seen too many African Entrepreneurs building versions of the well know apps like Uber Eats, Lyft, you name them. But as we have all come to learn ‘not all problems need an app’ and that is one lesson that we still need to learn.
Market Saturation: The African market is flooded with internet-based solutions, many of which are inaccessible or irrelevant to the majority of the population. A big African population is still living under $2 a day, which means that startups with internet based solutions face a big block when they try to scale.
AI Mismatch: The global AI hype often leads to over-engineered solutions that don't align with Africa's current technological infrastructure. While AI has potential in sectors like healthcare (e.g., conversational bots for patient care), its application is hindered by inadequate infrastructure and a lack of standardized data practices.
Investor Disconnect: The problems African startups aim to solve may not resonate with Western investors, whose priorities often differ. For example, solutions that address basic infrastructure needs might be considered the government's responsibility in other regions.
Unicorn Fever: The relentless pursuit of "unicorn" status by many startups often distracts from building solid business fundamentals. We have seen since 2019 that there was a rush for quick returns among African startups which has led to unsustainable growth strategies.
So what is the mitigation to all these problems?
African startups need to focus on solving local problems with locally relevant solutions no matter how small the impact will start off. We should be comfortable with failing for a while before climbing the ladders. Especially if we can remind ourselves that the Big Tech companies in the West were also built to unicorn statuses over time and not over night.
African Governments need to step up to their role of building policies that support technology development and creating a more conducive environment for tech innovation.
Startups should prioritize sustainable growth and sound business fundamentals over the lure of rapid valuations.
Want to be a part of the next discussion? Or meet young African Entreprenuers navigating this rocky tech landscape? Join our WhatsApp Group Chat.
We can’t wait to meet you live!
