By Emmanuel Ogbodo
As global funding for artificial intelligence (AI) reaches record quarterly levels, African AI startups have lagged significantly, contributing only $4 million in the second quarter of 2024, according to a report by CB Insights, a global technology startup analytics firm.
This $4 million from African AI startups represents a mere fraction of the $23.2 billion in total global funding, accounting for less than 1% of the total investment. While these figures highlight the relatively low investment in AI-based solutions on the continent, they do not reflect its adoption.
Many African companies and organisations continue to adopt AI solutions to enhance productivity, reduce manpower waste, and improve efficiency. The countries leading in AI adoption in Africa are South Africa, Nigeria, Kenya, and Ghana. However, most of their AI solutions are imported and often rely on global players like Microsoft and Google.
The development of AI solutions in Africa faces significant challenges, including the lack of accessible electronic data, insufficient regulation, and issues surrounding data privacy and identity protection. Moreover, there is a notable shortage of technical skills needed to build AI solutions from scratch. These issues dampen investor enthusiasm for backing AI solutions on the continent.
Globally, AI startups raised a total of $23.2 billion in the second quarter of 2024, marking a 59% increase from $14.6 billion in the first quarter. This represents the highest global quarterly funding, surpassing the $23 billion raised in the second quarter of 2021.
“The increase was driven by several $1 billion-plus funding rounds and outpaced overall venture funding growth by 8%,” the report noted.
Among the significant funding rounds, Elon Musk’s xAI raised $6 billion in a Series B round, accounting for nearly 26% of the total global funding. UAE’s G42 secured the second-highest funding of the quarter with a $1.5 billion corporate minority raise, representing 6.5% of the total investment.
CoreWeave, an American startup, raised $1.1 billion in a Series B round, representing 4.7% of the total. Both Scale and Wayve also closed $1 billion mega-rounds during the quarter.
“A relatively small number of players have significantly impacted this upward trend, securing massive $1 billion-plus deals in Q2’24, including xAI ($6 billion) and G42 ($1.5 billion),” the report stated.
The number of deals also improved, rising 16% in the second quarter to 948, up from 819 in the previous quarter. The average annual deal size rose to $28.9 billion in 2024 so far, a 55% increase compared to $18.6 million for the full year 2023.
Regionally, the United States led global funding efforts, raising $15.2 billion across 476 deals, accounting for 66% of global AI funding and 50% of global deal totals. Europe came second with $4 billion across 206 deals, followed by Asia with $2.8 billion across 215 deals. Canada attracted $700 million across 29 deals, while Oceania received $400 million across 9 deals.
At the lower end, Latin America secured $100 million across 8 deals, and Africa garnered $4 million across 5 deals. In total, six AI startup unicorns emerged during the quarter.