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    Flutterwave debunks Alleged Reports of Hacked Accounts

    Flutterwave debunks Alleged Reports of Hacked Accounts

    WorkPay raises $2.7million Pre-series A Funding to Expand its Services across Africa

    WorkPay raises $2.7million Pre-series A Funding to Expand its Services across Africa

    Jumba raises $4.5 Million Pre-seed to Expand the supply of Construction materials in Kenya.

    Jumba raises $4.5 Million Pre-seed to Expand the supply of Construction materials in Kenya.

    Naked secures $17 Million Series B to Expand its Digital Insurance Company in Africa

    Naked secures $17 Million Series B to Expand its Digital Insurance Company in Africa

    PICTDA announces Resumption Date for Code Plateau Cohort

    PICTDA announces Resumption Date for Code Plateau Cohort

    Releaf secures $3.3 million Pre-series A funding to improve its Food Processing Technology

    Releaf secures $3.3 million Pre-series A funding to improve its Food Processing Technology

  • FEATURED
    Nigeria’s Cash Swap Policy: Goals versus Results

    Nigeria’s Cash Swap Policy: Goals versus Results

    Six Things that could Shape the Northern Nigerian Tech Ecosystem in 2023

    Six Things that could Shape the Northern Nigerian Tech Ecosystem in 2023

    5 Exciting Things That Happened in the Nigerian Tech Ecosystem

    5 Exciting Things That Happened in the Nigerian Tech Ecosystem

    SmallSmall to Expand to Jos following a $3 Million Seed Raise

    SmallSmall to Expand to Jos following a $3 Million Seed Raise

    The Increase in Data Prices is a Big Challenge for Remote Workers in Nigeria

    How Tobiloba Olusola is making Electronic Health Records Accessible to Patients

    How Tobiloba Olusola is making Electronic Health Records Accessible to Patients

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    Binance now accepts Naira Deposits and Withdrawals

    Binance now accepts Naira Deposits and Withdrawals

    Cardano Accelerator Adaverse Invests in Afriguild’s Mission to Onboard Africans Into Web3

    Cardano Accelerator Adaverse Invests in Afriguild’s Mission to Onboard Africans Into Web3

    Is Africa Ready to Operate a Digital Monetary Policy?

    Is Africa Ready to Operate a Digital Monetary Policy?

    What Binance and TikTok Star, Khaby Lame’s Partnership mean for Crypto and Web3 Adoption

    What Binance and TikTok Star, Khaby Lame’s Partnership mean for Crypto and Web3 Adoption

    PLA2SMART Set to Lead a New Frontier in Nigeria’s Tourism Economy

    Bundle Launches Web App to Give Users More Accessibility to Crypto

    Bundle Launches Web App to Give Users More Accessibility to Crypto

  • FINANCE
    CBN prohibits Foreign Banks from Offering Banking Services

    CBN prohibits Foreign Banks from Offering Banking Services

    Flutterwave adds Google Pay to its Payment Options for African Businesses

    Flutterwave adds Google Pay to its Payment Options for African Businesses

    After Receiving Switching and Processing Licence from CBN, Flutterwave includes eNaira to its Payment Options

    After Receiving Switching and Processing Licence from CBN, Flutterwave includes eNaira to its Payment Options

    Flutterwave gets Switching and Processing licence from CBN

    Flutterwave gets Switching and Processing licence from CBN

    Google Expands its Digital Wallet to South Africa

    Google Expands its Digital Wallet to South Africa

    FCCPC Orders Drawdown of Online Credit Companies

    FCCPC Orders Drawdown of Online Credit Companies

  • START UPS
    WorkPay raises $2.7million Pre-series A Funding to Expand its Services across Africa

    WorkPay raises $2.7million Pre-series A Funding to Expand its Services across Africa

    Naked secures $17 Million Series B to Expand its Digital Insurance Company in Africa

    Naked secures $17 Million Series B to Expand its Digital Insurance Company in Africa

    PressOne Africa raises $600,000 Pre-seed Funding to Support Entrepreneurs

    PressOne Africa raises $600,000 Pre-seed Funding to Support Entrepreneurs

    ThriveAgric selected West African Winners of the AYuTe Africa Challenge, receiving $1 million.

    ThriveAgric selected West African Winners of the AYuTe Africa Challenge, receiving $1 million.

    Yebo Fresh raises $4.5 million to Supply Fresh Food in South Africa

    Yebo Fresh raises $4.5 million to Supply Fresh Food in South Africa

    Sky.Garden survives Shutdown, gets New Owners

    Sky.Garden survives Shutdown, gets New Owners

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  • NEWS
    Flutterwave debunks Alleged Reports of Hacked Accounts

    Flutterwave debunks Alleged Reports of Hacked Accounts

    WorkPay raises $2.7million Pre-series A Funding to Expand its Services across Africa

    WorkPay raises $2.7million Pre-series A Funding to Expand its Services across Africa

    Jumba raises $4.5 Million Pre-seed to Expand the supply of Construction materials in Kenya.

    Jumba raises $4.5 Million Pre-seed to Expand the supply of Construction materials in Kenya.

    Naked secures $17 Million Series B to Expand its Digital Insurance Company in Africa

    Naked secures $17 Million Series B to Expand its Digital Insurance Company in Africa

    PICTDA announces Resumption Date for Code Plateau Cohort

    PICTDA announces Resumption Date for Code Plateau Cohort

    Releaf secures $3.3 million Pre-series A funding to improve its Food Processing Technology

    Releaf secures $3.3 million Pre-series A funding to improve its Food Processing Technology

  • FEATURED
    Nigeria’s Cash Swap Policy: Goals versus Results

    Nigeria’s Cash Swap Policy: Goals versus Results

    Six Things that could Shape the Northern Nigerian Tech Ecosystem in 2023

    Six Things that could Shape the Northern Nigerian Tech Ecosystem in 2023

    5 Exciting Things That Happened in the Nigerian Tech Ecosystem

    5 Exciting Things That Happened in the Nigerian Tech Ecosystem

    SmallSmall to Expand to Jos following a $3 Million Seed Raise

    SmallSmall to Expand to Jos following a $3 Million Seed Raise

    The Increase in Data Prices is a Big Challenge for Remote Workers in Nigeria

    How Tobiloba Olusola is making Electronic Health Records Accessible to Patients

    How Tobiloba Olusola is making Electronic Health Records Accessible to Patients

  • BLOCKCHAIN
    Binance now accepts Naira Deposits and Withdrawals

    Binance now accepts Naira Deposits and Withdrawals

    Cardano Accelerator Adaverse Invests in Afriguild’s Mission to Onboard Africans Into Web3

    Cardano Accelerator Adaverse Invests in Afriguild’s Mission to Onboard Africans Into Web3

    Is Africa Ready to Operate a Digital Monetary Policy?

    Is Africa Ready to Operate a Digital Monetary Policy?

    What Binance and TikTok Star, Khaby Lame’s Partnership mean for Crypto and Web3 Adoption

    What Binance and TikTok Star, Khaby Lame’s Partnership mean for Crypto and Web3 Adoption

    PLA2SMART Set to Lead a New Frontier in Nigeria’s Tourism Economy

    Bundle Launches Web App to Give Users More Accessibility to Crypto

    Bundle Launches Web App to Give Users More Accessibility to Crypto

  • FINANCE
    CBN prohibits Foreign Banks from Offering Banking Services

    CBN prohibits Foreign Banks from Offering Banking Services

    Flutterwave adds Google Pay to its Payment Options for African Businesses

    Flutterwave adds Google Pay to its Payment Options for African Businesses

    After Receiving Switching and Processing Licence from CBN, Flutterwave includes eNaira to its Payment Options

    After Receiving Switching and Processing Licence from CBN, Flutterwave includes eNaira to its Payment Options

    Flutterwave gets Switching and Processing licence from CBN

    Flutterwave gets Switching and Processing licence from CBN

    Google Expands its Digital Wallet to South Africa

    Google Expands its Digital Wallet to South Africa

    FCCPC Orders Drawdown of Online Credit Companies

    FCCPC Orders Drawdown of Online Credit Companies

  • START UPS
    WorkPay raises $2.7million Pre-series A Funding to Expand its Services across Africa

    WorkPay raises $2.7million Pre-series A Funding to Expand its Services across Africa

    Naked secures $17 Million Series B to Expand its Digital Insurance Company in Africa

    Naked secures $17 Million Series B to Expand its Digital Insurance Company in Africa

    PressOne Africa raises $600,000 Pre-seed Funding to Support Entrepreneurs

    PressOne Africa raises $600,000 Pre-seed Funding to Support Entrepreneurs

    ThriveAgric selected West African Winners of the AYuTe Africa Challenge, receiving $1 million.

    ThriveAgric selected West African Winners of the AYuTe Africa Challenge, receiving $1 million.

    Yebo Fresh raises $4.5 million to Supply Fresh Food in South Africa

    Yebo Fresh raises $4.5 million to Supply Fresh Food in South Africa

    Sky.Garden survives Shutdown, gets New Owners

    Sky.Garden survives Shutdown, gets New Owners

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Home Featured

The Reality of the Global Economic Slowdown is hitting the Tech Startup Sector in Africa

by Ajifa Solomon
September 25, 2022
in Featured
Reading Time: 8 mins read
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The Reality of the Global Economic Slowdown is hitting the Tech Startup Sector in Africa
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The past six years have been an immersive journey in Africa’s startup ecosystem as 7 companies’ valuations soared to $1 billion to become unicorns.

Moreover, during the Covid-19 pandemic and its ensuing lockdown, the fintech and e-commerce sectors became front liners in driving the continent’s economy forward. 

These sectors needed to maintain the digital culture they created when physical meetings and traditional solutions were not viable. And to do this, funding was needed. 

Image credit: Statista

Competition increased as innovators and entrepreneurs discovered a thriving sector fueled by the deficits in traditional sectors. 

  • For instance, fintech challenged traditional banks with fast, seamless and less expensive costs. 
  • E-commerce startups disrupted the traditional market with seamless technology that collates orders and makes doorstep deliveries.
  • The health sector plunged into tech to offer virtual consultancies, conduct tests in nearby labs and deliver test results virtually to better serve patients. 

In 2021, African startups raised over $4 billion, thrice the amount raised in 2020. Investors turned the green light on the continent resulting in massive funding. Ventures, Grants, and Incubators have been a well-serving fuel for the smelting ecosystem. 

In H1 2022, African startups defied this forecast when they raised $3 billion, more than half the total amount raised in 2021. However, the reality is beginning to stagger the turbo-charged growth of startups given the funding downtrend in H2. 

A funding slump

The World Bank forecast predicts an economic recession among emerging markets and developing economies, stating that growth is also projected to fall from 6.6% in 2021 to 3.4% in 2022—well below the annual average of 4.8% over 2011-2019. 

In seeking to find solutions to the zombie attack on funding, CRESTHUB spoke with Caleb Maru, General Partner at Proximity Ventures, an Africa-focused Venture Capital firm.

According to Maru, “factors, like inflation and the war in Ukraine are big contributors to the funding drought in Africa. Moreso, the US is experiencing the highest inflation since the 1980s; oil prices have spiked due to the war and in response; central banks are raising interest rates to combat high inflation.

“This has a flow of effect on capital markets, with global equities in growth sectors like technology most affected. Now that there is less optimism, people have taken their money out of the market,” he said.

He added that “a lot of limited partners who invest in funds make their money in other places, like public markets. When public markets go down, there is less money to go around for venture capital funds. This makes some investors more cautious and less likely to invest in companies.”

He also warned that funding rounds from series A upwards could drop even lower than the existing status.

This implies that pockets, wallets, savings, funds and wherever an investor can source money from have been adversely affected.  However, startups will, regardless of a recession, be asked to prove their value and sustainability in the competitive market.

In response to this global recession, companies around the world have begun laying off staff to cut costs. Maru attributed this to the culture that encouraged it to grow quickly because money was available. 

“Now startups are focused on becoming profitable and sustainable so that they don’t die. This means reducing burn (money spent) and increasing revenue. Startup’s biggest costs are people, so they are the first to be cut when there is a downturn,” he said.

Several giant firms have begun exploring firing measures for staff.

  • US Automotive company Tesla laid off 229 members of its data annotation team.
  • Microsoft also traversed this path with the job cuts of 350 staff working with its news-related products. 
  • Netflix, the global video streaming giant, reduced its headcount by 450 this year.

Layoffs in Africa

Africa, which has begun joining global books in making strides as a unicorn holder, is currently more volatile than other long-standing companies around the world. The days to come will test the sustainability of the nascent startup ecosystem in Africa.

  • Marketforce laid off 9% of its 600 staff in a July freeze, as part of a ‘reorganization strategy.’
  • Egypt’s Swvl in May announced plans to lay off 32% (400) of its workforce.
  • Nigerian challenger bank, Kuda, laid off a little below 5% of its 450 teams. 
  • Francophone Africa’s Wave, had frozen the appointments of 300 of its staff.
  • Nigerian genomics startup, 54genes reduced its headcount by 95 in August.
  • Healthcare startup Vezeeta lessened its 500 teams by 50 persons in June.
  • Meanwhile, Kenyan food delivery startup, Kune Food also shut down operations in May barely after a year of launch.

And this is no continent-specific problem. It is global. A global layoffs tracker holds the disclosed number of layoffs worldwide at 120,567 from 761 companies since January.

The only fresh breath of air amid the dismal job cuts is the recent hiring of 200 persons to join Flutterwave’s workforce.

Maru added that employee retention ought to remain a culture of startups. “Good culture is important all the time, not just during bad,” he said.

Acquisitions:

Acquisitions which entail obtaining most or all of a company’s shares are well-known for leading companies into existing markets rather than growing a user base from scratch.

For instance,  MFS Africa has acquired a good number of companies to become a pan-African payments service provider. Liquid intelligent Technologies has also been riding the crest of acquisitions to drive software solutions across Africa. Nigerian Business-to-Business platform, TradeDepot earlier in February acquired its Ghanaian competitor, Green Lion to venture into the existing market. 

It is usually easier to acquire a company than to start a new one but what could this mean for the acquired company? Maru said that mergers and acquisitions could become prevalent in this economic phase to retain existing staff for one year before dismissal.

“Startups with a lot of capital can now buy other companies that were previously too expensive before,” he confirmed.

To brave these difficult times, Maru stated, “If you need to reach profitability and cut costs, do it as soon as possible. And treat your team well. Culture is the most important in hard times like this,” he concluded.

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Tags: africaCaleb MaruFundingProximity VenturesSlowdownstartups
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