Despite South Africa’s disappointing year, 2022 was a record year for continent as a whole for tech startups, with more than 600 receiving $3.3 billion, a 55.1% increase from 2021.
The start of 2023 has been difficult for South African tech startups after investment fell throughout 2022 in Africa. Last year, South Africa saw a year-on-year (YoY) drop in both the number of startups receiving funding and the total amount of funding received, according to the 2022 African TechStartups Funding Report by Disrupt Africa,
Despite South Africa’s disappointing year, 2022 was a record year for the continent as a whole for tech startups, with more than 600 receiving $3.3 billion, a 55.1% increase from 2021.
However, with global economic headwinds starting to catch up with Africa, African tech startups only received $649 million in Q1 2023, a nearly 57.2% decrease from the same period in 2022.
Despite a strong start to the year for the continent, growth was hampered by a very quiet March. Envisionit Deep AI, an e-health platform, received over $1.65 million in South Africa (R30 million).
Additionally, the following businesses raised money: Planet42, a car subscription service, raised over $100 million (R1.8 billion); Lulalend, a credit company, raised $35 million (R640 million); Carry1st, a gaming startup, received $27 million (490 million); and Naked, an insurance and technology company, received $17 million (R310 million).
Additionally, Yebo Fresh, an order-to-delivery service, Right Now Response, a breakdown management response app, and Flow, a prop-tech startup, all received millions of dollars in funding. Sendmarc, an online security company, was also a recipient.
But for the first time, Africa is beginning to experience a decline in foreign investment. Furthermore, it will be difficult to find capital in South Africa after Naspers closed its start-up-focused investment vehicle Foundry, blaming the international investment climate.
The Month in VC podcast guests Gabriella Mulligan and Tom Jackson from Disrupt Africa predicted that 2023 would be a declining year, with only 87 startups receiving funding in the first quarter, down from 175 in the first quarter of 2022.
Q1 2022 accounted for roughly half of the startups that received funding and half of all total investment for the whole year, so if the current trajectory stays the same, YoY funding will decline by over 50%. Despite a positive outlook at the start of the year, local companies look set to join their international counterparts for a challenging year.
Major international companies, such as Twitter, Amazon, Google, and Meta, have retrenched thousands of employees due to global financial pressures and high levels of inflation. Industry experts also reported that many tech jobs in South Africa are on the chopping block due to rising interest rates.
Telkom announced it would retrench 15% of its staff due to restructuring, but there has been positive news in the South African tech startup environment in Q2 2023.
Paymenow secured an R250 million debt facility via Rand Merchant Bank, and Peach Payments raised over $31 million in Series A funding to accelerate its growth.