The venture capital industry in Africa is facing troubling times as the latest report from the African Private Capital Association (ACVA) reveals a significant downturn in the first quarter of 2024.
According to the report released on May 29 by ACVA, the volume of venture capital deals declined to just 113, registering the lowest quarterly activity in three years and extending the troubling downward trend that began in 2023. This decline in deal volume was mirrored by a drop in deal value, which fell to US$0.4 billion, constituting just half of the five-year average for the first quarter.
This downward trend follows a disappointing 2023, where the private capital industry recorded a 28 percent decline in activity. The 2023 annual private capital report by ACVA showed there were 450 deals registered in 2023, a steep decline from the 627 deals in 2022. With a 28 percent decline in deal volume, the report said the total value of deals went down 22 percent year-over-year in 2023, reflecting growing investor caution amid challenging macroeconomic conditions.
Among all asset classes considered, venture capital was hit particularly hard, with a 34 percent decline in total investment. According to the report, the decline in private capital activity was largely driven by venture capital’s poor performance. The report noted that despite poor performance, venture capital still constituted a commendable 68 percent of the total private capital investment volume in Africa, underscoring its ongoing significance as a leading private capital asset class.
After a disappointing year for the venture capital industry in 2023, the situation continues to worsen following a 2024 Q1 venture capital activity report by ACVA. The report highlighted a continuing decline in the performance of venture capital.
The latest venture capital activity report by the African Private Capital Association (ACVA) on May 29 reveals a notable decline in both the volume and value of deals in the first quarter of 2024. The number of deals fell to 113, registering the lowest quarterly deal activity in three years and continuing a downward trend in investor activity. The report also highlights a significant reduction in deal value, which dropped to US$0.4 billion, representing just half of the five-year average for the first quarter.
In the overall outlook by region, there are signs of resilience. Southern Africa maintained a 16 percent share of venture deal value and declined from 21 percent to 13 percent in deal volume, this is from 2023 through Q1 2024. Moreover, East Africa dethroned West Africa by deal volume in the first quarter of 2024, claiming the top spot in venture capital deal volume.
The financial services sector continued to dominate with a 25 percent share of deals completed, followed by information technology at 19 percent. The financial sector also led in terms of deal value, accounting for 47 percent of the total, followed by consumer discretionary at 16 percent. The report also noted that 37 percent of the deal volume originated from multi-region investments, reflecting broad interest in cross-border opportunities within the continent.
Interestingly, while venture capital struggled, venture debt remained stable. The first quarter of 2024 saw 18 venture debt deals totalling US$133 million, indicating that some investors still find opportunities in this niche area.
