According to TechCrunch, which is the most reliable and resourceful newspaper on high-tech and startup companies, African startup funding has seen a significant decline of more than 50% over the past three quarters compared to the previous year. To date, startups on the continent have secured funding in the range of $2.5 billion to $3.4 billion, based on data from the Bid Deal and Bridges.
It is noteworthy to state that this decline is not exclusive to Africa. Venture capital worldwide has retraced to pre-COVID levels. However, Africa’s diminishing numbers are particularly concerning given its reliance on external, especially compared to other emerging tech ecosystems such as India and Latin America.
According to a report from the African Private Equity and Venture Capital Association (AVCA), 77% of the venture capitalists who funded African startups last year were outside the continent.
Thus, African VCs and startups are increasingly looking to the Middle East for new capital. This is due to a number of factors, including the growing wealth of Middle Eastern investors, the increasing interest in African tech, and the complementary nature of the two regions' economies.
The Middle East is home to a number of wealthy investors, including sovereign wealth funds and family offices. This means that African startups can access large amounts of capital from Middle Eastern investors, which can help them scale their businesses. Moreover, the Middle East is geographically close to Africa, which makes it easier for Middle Eastern investors to learn about and invest in African startups.
However, there are also some challenges that African VCs and startups need to be aware of when raising capital from Middle Eastern investors. One challenge is that Middle Eastern investors may not be as familiar with African startups as they are with startups in other regions. This can make it difficult for African startups to explain their business models and value propositions to Middle Eastern investors despite their geographical proximity.
Another challenge is that Middle Eastern investors may have different expectations than African investors. For example, Middle Eastern investors may be more interested in startups that are already generating revenue, while African investors may be more willing to invest in startups that are still in the early stages of development.
Despite these challenges, there are a number of ways that African VCs and startups can increase their chances of success when raising capital from Middle Eastern investors. One way is to build relationships with Middle Eastern investors before pitching them their deals. This can be done by attending industry events, connecting with investors on LinkedIn, and sending out personalized emails.
Another way for African startups and VCs to increase their chances of success is to tailor their pitch to Middle Eastern investors. This means highlighting the unique opportunities that exist in the African market and explaining how their startup can help Middle Eastern investors achieve their goals.