👨🏿‍🚀 TechCabal Daily – Will venture funding slow down in Africa?

👨🏿‍🚀 TechCabal Daily - Will venture funding slow down in Africa?

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WILL VENTURE FUNDING SLOW DOWN IN AFRICA?

Venture funding is slowing down in the US, Asia and Latin America, and big venture capital firms are adjusting their strategies to focus on early-stage startups. While Africa seems to be weathering the decline, there are concerns that growth-stage startups may struggle to raise capital, leading to mergers and acquisitions or early-stage companies will be deluged with too much cash.

African startups are already seeing some of that refocused capital. Tiger Global and Softbank, some of the biggest investment firms globally, have directly led or participated in some of the biggest disclosed seed and pre-seed deals in Africa since January this year, including two seed deals above $10 million. So investors and ecosystem stakeholders are beginning to ask questions.

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Stephen Deng, a partner at San Francisco-based venture capital firm DFS Lab believes that while the effect of a funding slowdown in Africa may take some time to show, ultimately African startups will need to adjust to the new venture funding reality, “Obviously the later-stage investors are going to contract their valuations and yet there will still be high valuations early on,” he tells TechCabal in a call. Deng however, says that how Sufficient Capital, a DFS Lab investment syndicate invests will not change. “Our thesis,” he tells TechCabal on a call earlier this week, “does not change during the more capital intensive times. And it’s because we continue to invest in businesses that are fit for the continent and do not require a very capital-rich environment to succeed.”

Abraham Augustine has more in Venture funding is slowing down globally. Should African startups be concerned?

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SUNFI’S PLAN TO IMPROVE SOLAR ACCESS IN NIGERIA

When Rotimi Thomas and his two colleagues decided to pivot from installing solar systems to expanding access to solar services that could supplement Nigeria’s unstable power grid, they immediately ran into an issue: many Nigerians, particularly those from the middle class, were discouraged by the high upfront costs. 

Rural electrification— subsidies in the form of micro credits that help purchase renewable energy systems like solar home systems—accommodates extremely poor Nigerians who cannot afford rural electricity. But Thomas realised that his next business endeavour would need to address the needs of Nigerians who are at risk of falling through the cracks between rural land and industrialised solar power projects. In April 2021, he and his business partners, Tomiwa Igun and Laolu Faniyi, founded SunFi, an energy fintech company that offers credit to solar service providers, who in turn offer affordable payment plans to their customers. 

“There is a lot of focus on rural electrification and industrial or big commercials but no one has cared so much about how to make it easy for small families in urban areas,” Thomas, who serves as SunFi’s CEO, told TechCabal over the phone. “But we have seen this need impact because we are homegrown, we understand their pain points.”

Despite being Africa’s largest oil producer, Nigeria struggles to meet its power needs, producing 4,500 megawatts of electricity for its 200 million-strong population.

Read more: SunFi wants to improve access to solar services for middle-class Nigerians.

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