During the first half of 2023, Ghana’s startup funding landscape underwent a substantial downturn, registering an 86% decrease compared to the same period in the prior year, amounting to a total of $25 million raised in equity and debt deals. This decline, the most pronounced since 2019, has prompted concerns within both the entrepreneurial community and among investors, signaling a potential shift in Ghana’s startup ecosystem.
This sharp reduction in funding comes on the heels of a vibrant 2022, marked by several significant deals that led to a total of $187 million raised. However, the dynamics appear to have altered significantly this year.
Isaac Newton Acquah, Co-Founder of The Innovation Spark, which published the report, attributed this change to global economic factors. He pointed out that the increase in the US Federal Reserve’s interest rates and inflation rates has had a cascading effect on cheap money, leading to a decrease in investments in Ghanaian startups. He predicts that 2023 funding is likely to hit its lowest point since 2019.
The funding decline in Ghana mirrors a global trend termed the ‘funding winter,’ which began in 2022 and has extended into 2023. This trend signifies a reduced flow of funds to startup companies. Previously, during the ‘funding heatwave,’ which saw a surge in investment, the Big Four African countries—Nigeria, South Africa, Kenya, and Egypt—collectively raised substantial sums between July 2021 and June 2022. However, a year later, these nations have experienced a notable drop in funding, with Nigeria facing the most significant decrease at 77% year-on-year. Egypt remained the most resilient among the Big Four, with a comparatively modest decline of 25% year-on-year.
Beyond the Big Four, other markets that raised over $100 million during the funding heatwave have also seen substantial reductions in funding. Tanzania and Ghana both experienced significant declines of 68% and 86% year-on-year, respectively. These changes indicate a broader shift in the funding landscape, impacting several African markets.
Richard Nunekpeku, Vice President, Legal and Strategy at the Ghana Fintech and Payments Association, attributed the previous investment boom to innovations in the fintech sector. However, due to a slower pace of new innovations and emerging corporate governance concerns in certain fintech companies, investors have become more cautious about providing additional funds. He anticipates that the trend of low investor capital/funding will persist in the near future, necessitating local startups to focus on innovation and potential collaborations to secure investments.
In terms of industry breakdown, the transport and logistics sector emerged as the leader in attracting investments during H1 2023, securing $13.2 million, largely driven by Jetstream’s $13 million Pre-series A round. Agriculture and food also received a boost from Degas’ $8 million Series A raise. In contrast, fintech, which played a pivotal role in 2022, saw a staggering 99% decline in funding. The health-tech sector faced a 17.5% decrease in funding during the same period.
In a noteworthy development, female-led startups and gender-diverse teams raised 52% of the total capital, although male-led CEOs still constituted the majority at 90% in terms of deal count.