Venture Capital in Africa: A Broken System in Need of Repair

In recent years, Africa has been touted as the next frontier for investment, with its burgeoning tech scene and a population ripe for innovation. However, beneath the surface lies a stark reality: the venture capital landscape in Africa is broken. As an entrepreneur who has navigated these treacherous waters, I’ve witnessed firsthand the challenges and shortcomings that plague the investment ecosystem on the continent.

One of the fundamental issues is the lack of sufficient capital available for startups. Despite the potential for high returns, many investors remain hesitant to allocate funds to African ventures due to perceived risks and uncertainties. This cautious approach stifles the growth and development of promising startups, leaving them starved of the resources needed to scale.

According to a report by the African Private Equity and Venture Capital Association (AVCA), while venture capital investment in Africa has been increasing in recent years, it still lags far behind other regions. In 2020, venture capital investment in Africa totalled just $1.4 billion, a fraction of the $156.2 billion invested globally.

The problem is exacerbated by a lack of local investors with the expertise and willingness to support early-stage startups. Many African entrepreneurs are forced to seek funding from international investors, who often have limited understanding of the local market dynamics and are more inclined to invest in safer, less risky opportunities.

As Rebecca Enonchong, founder of AppsTech and board chair of ActivSpaces, a tech hub in Cameroon, aptly puts it: “African entrepreneurs are facing a double whammy: a lack of access to capital and a lack of understanding from investors who are not familiar with the African context.”

Moreover, the dearth of exits in the African startup ecosystem further dissuades investors from committing capital to the region. Without successful exits, investors are unable to realize returns on their investments, perpetuating a cycle of underinvestment in African startups.

In a recent roundtable conversation organized by Qhala Limited, Ory Okolloh, currently Partner at Verod-Kepple Africa Ventures, highlighted this challenge, stating, “The lack of exits has been one of the biggest problems in the African market.” She further emphasized the need for more successful IPOs and acquisitions to demonstrate the viability of the African startup ecosystem and attract more investment.

More local venture debt is needed and there is also an opportunity for pension funds” she added.

Nick Vilelle, the founding member of Nairobi Business Angel Network noted that there are still a lot of undiscovered local founders. 

”Funding solutions will come from Africa. African startups should not highly depend on the VCs and Angel Investors abroad,” he said.

”Unicorn models are not going to work for African startups. We should strive to make our ecosystems work for us. We should challenge policies and regulations, make our universities improve, and adopt new systems and technological advancements that promote innovation and a culture of excellence.” 

To address these systemic issues and unlock the full potential of Africa’s entrepreneurial talent, concerted efforts are needed from both investors and policymakers. Investors must be willing to take calculated risks and provide the necessary support and mentorship to African startups. Additionally, policymakers must create an enabling environment by implementing policies that facilitate investment and foster innovation.

As I reflect on my own journey as an entrepreneur in Africa, I remain hopeful that with the right interventions, we can overcome the challenges plaguing the venture capital landscape and create a thriving ecosystem that empowers the next generation of African innovators.

In the words of Ory Okolloh, director of investments at Omidyar Network and co-creator of Ushahidi, “Africa is ripe with opportunities for innovation and entrepreneurship, but we need more investors who are willing to bet on the continent’s potential.”

It’s time for African investors to heed the call and invest in Africa’s future. The opportunities are boundless, and the time to act is now.

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Allan Niongira

Passionate about amplifying creative voices across Africa. Send tips to

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