TLP Advisory: 51% of startups face dificulties in securing funding

A recent survey conducted by TLP Advisory has shed light on the struggles faced by startups in Africa, with 51% reporting difficulties in securing funding due to currency volatility. The survey also highlighted the emergence of angel investors as a crucial support system for these startups in the continent's ecosystem. Odunoluwa Longe, the Co-Founder and Partner at TLP Advisory, joined CNBC Africa to delve into the details of the report and discuss the near-term outlook for Africa's startup landscape. The African startup ecosystem has encountered a cash crunch in 2024, attributed to global inflation, market volatility, and a slowdown in business investments. Longe emphasized the significance of a survey conducted by TLP Advisory, which involved both quantitative and qualitative methodologies. Post-COVID, there was a surge in fundraising activity as the global community and local investors showed a keen interest in supporting startups. However, with the prevailing macroeconomic conditions leading to a decline in global investment appetite, local investors and businesses have taken charge. Angel investors have maintained a high-risk appetite, continuing to support startups in their early stages of growth. Longe noted a severe crunch in early 2020 and 2023, with recent activities primarily concentrated in the angel stage and early-stage investments. Startups are advised to adapt their approaches in response to the drop in funding by prioritizing profitability over high growth. Investors are now seeking profitability and product-market fit, prompting startups to focus on efficient customer acquisition and retention strategies. Despite the challenges, there is still capital available, with funds being created and investors doubling down on previous investments while hunting for profitable ventures. Longe underscored that running efficient businesses, focusing on customer satisfaction, and minimizing wastage are crucial for startups eyeing success in 2024. The report highlighted four countries, namely Nigeria, Egypt, South Africa, and Kenya, which have consistently secured 70% of funding in the past decade. However, Longe pointed out the growing momentum in Francophone West Africa, particularly in Senegal and Cote d'Ivoire, presenting emerging opportunities for investments outside the dominant quartet. When queried about the government's role in supporting local and international VC investments, Longe commended the passing of the Nigerian Startup Act as a step in the right direction. Implementing the act, which includes provisions to attract local and global investors, is crucial for fostering a more vibrant startup ecosystem. Longe also emphasized the need for policy consistency, transparency, and access to facilitate a supportive environment for startups. He urged startups to engage with the government and advocated for harmonization of policies to enhance the overall ecosystem and stimulate economic growth. In conclusion, Longe's insights underscore the challenges and opportunities present in Africa's startup landscape. As startups navigate the funding landscape amid currency volatility, strategic adaptions and policy initiatives are essential to foster a resilient and thriving ecosystem in the continent.