African Startups Funding Shifts Gear: Debt Financing And Climate Tech Fuel Growth in 2024
A recent report by Africa: The Big Deal, has revealed a significant shift in the funding landscape for African startups in 2024. Debt financing and climate tech have emerged as key drivers, attracting a substantial portion of the total investments.
In the third quarter (Q3) of 2024, African startups secured $636 million through deals exceeding $100,000. Of this amount, 62% was raised through equity, while 35% came from debt financing, indicating a growing preference for debt-based funding.
The report highlights that the increased availability of debt capital, the maturing startup ecosystem, and improved communication about debt fundraising have contributed to this trend. While debt financing is on the rise, equity fundraising has seen a decline compared to previous years. Startups have raised around $920 million in equity so far in 2024, which is comparable to the total equity raised in 2020 but significantly lower than the levels seen in 2021 and 2022.
Despite this slowdown, climate tech has attracted substantial investment. In Q3 2024, approximately 35% of all investments were directed towards climate-related ventures, aligning with year-to-date figures. Over half a billion dollars have been invested in climate tech in Africa so far this year.
The Fintech and Energy sectors continue to dominate funding in 2024, accounting for nearly 90% of total investments in Q3. Fintech raised $363 million, while Energy attracted $199 million. Year-to-date, Fintech remains the leading sector, followed by Energy. Logistics and Transport came in third, primarily due to major deals earlier in the year.
As the African startup ecosystem evolves, the increasing importance of debt financing and climate tech suggests a more diversified and resilient landscape.
