Assessing appetite for VC funding in Nigeria

Venture capital funding in Africa has been facing a crisis amid global economic challenges, with a significant decline in the volume of dollars flowing into tech startups across the continent. Kola Aina, Founding Partner of Ventures Platform, discussed the impact of the funding crunch on the African tech ecosystem and shared insights on emerging trends and sectors attracting venture capital investments. Despite the challenges, Aina remains optimistic about the future outlook for VC funding in Nigeria and the African continent in 2024. In 2023, African startups witnessed a 60% decline in venture capital funding, reflecting global trends as interest rates rose and public IPO markets faced volatility. However, Aina views this downturn as a necessary 'reset' following years of exuberance, indicating a return to normalcy and a slower pace of capital velocity. Despite the pullback of 'tourist venture capitalists,' Aina emphasizes the strength of local investors in supporting promising companies amid the challenging funding environment. The top four African markets, including Nigeria, South Africa, Egypt, and Kenya, have grappled with foreign exchange pressures, making it difficult for startups to demonstrate growth in dollar terms. As a result, there has been a shift towards early-stage investments, particularly at the pre-seed and seed stages, to alleviate the bottleneck at the growth and later stages. Additionally, the emergence of new tech verticals such as clean tech, climate tech, and health tech has diversified the investment landscape, with previously overlooked sectors gaining traction among investors. Looking ahead to 2024, Aina predicts a continued focus on fintech innovation while highlighting the growing importance of clean tech and climate resilience solutions. Ventures Platform's strategic investments in Francophone Africa and climate tech reflect a commitment to supporting innovative companies driving impact in these sectors. Despite the uncertainties in the market, Aina remains bullish on the potential for VC funding to reach new heights in the coming year, with a projected total investment volume of between three and 3.5 billion dollars across the continent. As the ecosystem evolves and adapts to global challenges, venture capitalists like Ventures Platform are poised to capitalize on emerging opportunities and support the next generation of tech leaders in Africa. With a diversified portfolio and a focus on sustainability and growth, the future of VC funding in Nigeria and the broader African continent looks promising.