African energy startups raised more funding than ever before – what happened to the ‘funding winter’?

In 2020, Startups in Africa’s energy sector managed to raise US$70,306,000 in funding and all startups on the continent managed to raise US$700 million in what was described at the time as a “record year” by Disrupt Africa. At the time everyone was well aware that there was still room for growth in funding for African startups but few examples illustrate that growth quite as well as what has since happened in the energy sector.

In 2023, startups within this sector managed to raise an eye-watering US$656,863,000 in funding - quite close to what was raised by the entire startup industry just 4 years prior. This US$656.9mn is quite interesting as historically, African energy startups have only raised between 4%-10% of total startup funding but last year that number grew to nearly a third 27.2%.

Energy startups funding trends

It will be interesting to see whether 2023’s high can be sustained in the long term but energy startups have progressively been raising more and more over the years;

We know that generally - a low number of energy startups get funded but they tend to receive larger checks as they operate within a capital-intensive field that has slow profitability paths. Business models in the energy sector tend to have pay-as-you-go elements sometimes targeted towards low-income populations (as we’ll see in the case study section of the article) which means check sizes need to be heftier than usual.