Industry experts delved into the nuances of funding in 2024 in a recent live episode of The African Pre-seed Podcast hosted by Founders Factory Africa.
The panel, featuring Rology CFO Jason Musyoka, Seedstars’ co-founder Bruce Nsereko-Lule, and Senga Technologies’ CEO June Odongo, explored the dynamics of securing capital in a landscape where African startup funding has experienced a notable decline from the peak witnessed in 2021 and 2022.
According to the African Tech Startups Funding Report by Disrupt Africa, investments in African startups witnessed a 27% dip in 2023, accompanied by a halving in the number of investors.
Despite these challenges, the panelists unanimously stressed the importance of startups being discerning in their choice of investors.
They emphasized the need for founders to navigate investors’ evolving priorities and tailor their fundraising strategies accordingly.
Fundamentals and Sustainability of Ventures
One key shift highlighted by the panelists is the changing expectations of investors. With capital no longer as readily available as before, investors are now placing greater emphasis on the fundamentals and sustainability of ventures rather than just their potential for high growth.
This necessitates founders to develop clear roadmaps with achievable milestones and contingency plans, ensuring they can adapt to unforeseen circumstances while staying on course.
Moreover, due diligence has become a focal point for investors seeking ventures with robust fundamentals and realistic growth projections.
Startups are advised to showcase their strengths during the due diligence process to instill confidence in potential investors and mitigate unexpected surprises down the line.
In light of these changes, founders are encouraged to prioritize sustainable growth over rapid expansion. Rather than aiming for accelerated growth in a low-interest environment, startups should focus on building a profitable business that can attract further investment in the future.
This strategic shift requires founders to assess whether their current trajectory aligns with long-term sustainability and profitability.
Partners Must Align With the Startup’s Goals and Values
When it comes to selecting investors, the panelists underscore the importance of choosing partners who align with the startup’s goals and values.
While international investors may offer substantial funding, local investors bring a contextual understanding of the market and valuable networks that can propel startups to success.
By leveraging local expertise and connections, founders can access opportunities that might otherwise be out of reach.
Ultimately, the quality of the investor is paramount. Founders should evaluate investors based on their ability to add value beyond capital, considering factors such as industry expertise, network access, and strategic guidance.
By aligning their investment strategy with their business objectives and leveraging a mix of local and international investors, startups can position themselves for sustainable growth and long-term success in the competitive African startup ecosystem.
The evolving landscape of startup funding in Africa necessitates a strategic approach to investor selection and fundraising.
By staying attuned to shifting investor expectations, prioritizing sustainability, and forging strategic partnerships, founders can navigate the complexities of securing capital and chart a path towards growth and prosperity in 2024 and beyond.
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