The Future of Fintech in Africa

United States

After a nearly 6 month mega-deal hiatus, mega deals in the MEAPT region are back! Many investors seemed to enjoy a quiet summer; all $500 million of which were signed and announced in the month of September. It&#39;s been a dry summer, to say the least. Investors seem to be patiently waiting it out to see which businesses are robust and resilient enough to survive. Though Q3 2023 funding has slightly recovered from the barren summer months, it is still 7.5% lower than Q3 2022 figures. With interest rate hikes taking a pause for now, it looks like we&#39;ll just have to wait for Q4 to tell us if things are on the up and up.

MEA VC Funding & Deal Flow Quarterly Analysis 2022 until Third Quarter 2023 (excluding Israel)

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The VC Winter came a bit later to Africa because of its relatively smaller deal sizes attracting investment late into the 2022; but... brrrrr... 2023 data tells a story of a dramatic downturn. Historically, African VC deals have been 50%+ focused on lower growth stage deals. But in 2023, VC deals on the Mother Continent have focused more on later stage investments, backing incumbents in major tech sectors. As inflationary pressures and the US treasury interest rate hikes continued into the Summer of 2023, the world is starting to acutely feel the pinch of the higher cost of capital.

When we spoke to Investors for their insights, they explained that because most VCs across the world raise funds in US dollars, they need to hedge foreign currency risk by going and investing in markets where foreign currency is more stable. This leaves African economies (and many other emerging markets) particularly vulnerable, as their currencies weaken against the US dollar. Lucidity Insights research shows that much of the domestic African capital is having to do the same, whether they are HNWI angel investors or African funds.

Africa VC Funding 2021- Q3 2023 - The VC Winter is Hitting Africa Hard in Q3 2023

Africa VC Funding 2021- Q3 2023

<h3>If the Data Could Speak&hellip;</h3>

Crude math that averages out the total funds raised by Stanford graduates, tells us that each Stanford graduate founder raises $48 million, on average. Harvard graduate founders raise on average $45 million. MIT graduate founders raise $39 million on average; UC Berkley graduate founders raise $33 million on average; and finally, UPenn graduate founders raise $33 million on average. Now, that&rsquo;s crude math and statistics, but further analysis requires some hard questions. For example, &ldquo;is the amount of funding raised by a startup a real determinant or leading key performance indicator for that startup&rsquo;s success?&rdquo; It seems the industry measures and applauds many startups based on the amount they&rsquo;ve raised &ndash; perhaps because that is what is most measurable and most public. Key indicators such as high revenue growth rates, healthy profitability, low customer acquisition costs, and low employee turnover rates are kept confidential &ndash; as they are considered &ldquo;trade secrets&rdquo; that, if leaked, could erode competitive advantages.

Read more in the Full Article:&nbsp;<a href="https://lucidityinsights.com/articles/worlds-leading-universities-entrepreneurs">The World&rsquo;s Leading Universities for Entrepreneurs</a>

Middle East & Africa VC Funding & Deal Flow, ex-Israel, Quarterly Analysis (2022 - Q3 2023)

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