African startups raised a record $5.3 billion last year despite the deep recession in the tech industry, which has dwindled the funding pool.

“There are some red flags in that the mega-deals are largely driven by overseas, non-African-committed investors,” declared Dario Giuliani, director at Briter Bridges. “There is a risk that the pool for growth funding may be limited in 2023.”

Global funds such as Sequoia Capital, Tiger Global and the bankrupt crypto firm FTX have made some of the biggest investments in African startups in recent years. But Amazon.com is laying off more than 18,000 of her employees as recession looms in many Western countries and tech companies cut jobs at an accelerating rate. Private equity and venture capital firms may choose to save money.

Investments are concentrated in four more developed markets: Egypt, Nigeria, Kenya and South Africa, which are struggling with economic challenges ranging from slowing growth to depreciating currencies.

The Egyptian pound is at a record low, and Nigeria's economy struggles with mounting debt and a weakening currency. Ghana and Kenya have also seen their currencies depreciate.

"In 2021, companies were encouraged to grow at all costs, but now the focus is on saving cash, reducing burns and delaying the next round as long as possible," said William Sonneborn, global director, IFC.

Shares of African startup Jumia Technologies, which trades in New York, have fallen about 68% in the past 12 months, prompting the company's founder to resign in November. Chipper Cash and Wave were also affected by the collapse of Sam Bankman-Fried's FTX, which had invested in both.

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