Early-stage African startups have found it difficult to raise money this year. In July, GoLemon stopped taking orders after two years and tens of thousands of deliveries, with an average basket of about ₦43,700 ($32). The company said it made money on every delivery, but when it sought capital to scale, it could not raise enough to continue.

Its explanation for shutting reflects a position that more African startups have found themselves in as venture funding has tightened. FoodCourt paused orders after failing to raise new capital, while Gigbanc shut down after also struggling to secure funding. 

The headline funding figures suggest the African tech market has remained relatively resilient. TechCabal Insights’ State of Tech in Africa report puts funding in H1 2026 at $1.44 billion, up 1.4% year on year. But the number of deals fell from 252 to 174 over the same period, while funding that reached early-stage startups dropped to $9 million from $25 million.

Africa: The Big Deal, which tracks the market using a different methodology, found that only 190 startups raised at least $100,000 in the first half of 2026, the lowest half-year count since 2021. The number of startups raising between $100,000 and $1 million fell from 179 in H2 2025 to 100 in H1 2026, a 44% drop in six months.

If you read this together, the figures suggest that capital is still flowing into African startups but is reaching fewer companies and becoming increasingly concentrated among larger, later-stage businesses. The pipeline of smaller rounds has contracted particularly sharply, narrowing one of the key funding routes for startups trying to move from early experimentation to a more established business. 

For this week’s Ask an Investor, we asked investors three questions: what has changed in what startups must demonstrate to raise their first cheque? Who should fund the stage that is increasingly being left behind? And what would give more of these companies a better chance at surviving? The responses offer a view into how investors are assessing risk, traction and capital efficiency in a market where simply having a promising idea is no longer enough to attract funding. 

It is important to note that the views expressed are those of the individual investors and analysts who responded and do not necessarily represent the positions of their respective firms. 

The interviews have been edited for length and clarity.

What changed between 2022 and now in what an early-stage African startup has to show to raise its first cheque?

Samuel Frank: In 2022, an early-stage African startup needed to show innovation around an idea and how big a market could be for that idea. What has changed is that you now have to show that a market actually exists for that idea. You have to execute on your idea in some shape or form.

Pre-seed investing has changed over the last three or four years. Now, at pre-seed, people expect a startup to be doing maybe $1,500 to $2,000 a month and growing that at 10% to 20% month on month. What they are trying to validate is that you can execute on the idea you developed and that you are proving there is a business around it.

Amarachi Nwachukwu: The biggest change is the amount and type of capital available. Between 2019 and 2022, there was a lot of dry powder coming out of Silicon Valley, and investors were willing to deploy into new markets. We saw the likes of Y Combinator and Techstars start investing in our markets. They were willing to underwrite potential, but that appetite has changed. Cheques have slowed, and some investors have stopped deploying into Nigerian markets completely.

The bar is now very high. Every investor is asking for evidence like traction, a proven business model, revenue quality, and unit economics. They also evaluate your path to scale. In the early days, investors mostly looked at the team, the market opportunity, and the potential size of the market.

Beyond traction, investors look at founder-market fit (who you are as a founder and what assets you have). Then, in this market winter, investors look closely at how a company is going to survive. If we are going to invest $100,000 into your company today, I want to understand how many months of runway that gives you, the runway you already have, and your current burn. We give you a milestone: based on your current product roadmap, can $100,000 unlock a new revenue milestone that makes you more fundable?

If we see risk in your business model that could affect the outcome of the investment, we say no, even with traction. We also do the exit maths – what would need to be true for us to generate a return?

Another factor is product defensibility. The easier it is to build a product today using AI, the more I want to see what nobody else can replicate over a weekend. That could come from a regulatory angle, such as a licence you have or are working towards that is not easy to get. It could come from the quality of the technology itself. Investors have moved from underwriting possibility to underwriting evidence.

Mercy Ndubueze: The bar has shifted from potential to proof. In 2022, investors were more willing to back a compelling founder, a large market opportunity, and early traction. Today, founders need to demonstrate stronger evidence of product-market fit, revenue quality, customer retention, unit economics and, importantly, capital efficiency. Investors are asking not just how big this can become but also what you can achieve with this capital and how efficiently you can get there.

Pius Bankong: Fundamentals have been recentred. Most of the funding abundance in 2020-2022 was a result of the global monetary policy at the time (zero interest rate policy). Cheap capital was available, and that reflected in how it was deployed across a number of circumstances. As rates rose and capital tightened, investor priorities recalibrated. Greater emphasis was laid on things that demonstrated likely venture-scale outcomes, such as business performance, distribution, and a demonstrable line of sight to exponential growth and exit opportunities. There has been a need to recycle capital and achieve liquid exits aligned with venture-scale outcomes.

Angels and micro funds have thinned out in the $100,000 to $500,000 range. Who funds that stage now?

Samuel Frank: It was almost inevitable, especially when the level of exits did not match the level of investment that had gone in. Angels write around $100,000 and microfunds write between $100,000 and $250,000. If a startup does not show there is a business around the idea, it will struggle to raise funds from larger institutional investors, and there is a cap to what angels and microfunds can write per startup. Many can only fund you once.

The second part is that most angels and microfunds were raising money from aid agencies rather than commercial investors. Some of it was private capital from people who had retired and were pooling their resources. If these businesses do not deliver returns, it affects that pot directly, because it is someone’s personal cash. There is only a level to which a personal pot of cash can keep doling out funds before it depletes.

That stage matters because there are customer archetypes these businesses need to unlock, and that requires a high amount of business development. They also need to retain their team. You cannot keep building an exceptional startup on an ESOP alone. If you want exceptional talent to stay, that talent needs to be paid.

Pre-seed investors still exist in Africa. However, what is needed is collaboration between pre-seed investors here and investors elsewhere with an interest in Africa. Village Capital recently deployed $500,000 into three Ghanaian startups, and that was done with local collaboration. 

The businesses that last are the ones funded early enough that they do not lose key team members or run out of cash while proving the model works.

Amarachi Nwachukwu: This is very dangerous for the ecosystem. It has to be a collective effort. I would like to see more corporate venture capital at the pre-seed stage. If corporates participate, it could also create an exit pathway, which is what is lacking right now. Corporates can see the gaps in their own business, fund teams building products to fill those gaps, and eventually acquire them.

We also still need more early-stage funds in the market.

Mercy Ndubueze: This is one of the biggest gaps in the African funding ecosystem. That stage is critical because it gives promising companies the runway to move from early validation to institutional readiness. Blended finance has an important role to play here, alongside experienced operators who understand both the risk and the opportunity in these businesses and are willing to bet early. Those investors are often best positioned to provide not just capital, but the networks and operating experience these companies need.

Pius Bankong: The impact of the shift from the ZIRP era has been quite visible in this stage.

With fundamentals being recentred, the bar has also been adjusted so founders have to demonstrate venture-scale potential more convincingly. Angel investment activity has probably also slowed a bit as a result of the broader correction. Over time, though, this period also serves as a form of market education, helping angel investors build the confidence to deploy at greater scale and volume.

Separately, some of the capital that used to sit here (aid-linked and concessionary funding) has declined following shifts in the global political landscape.

Funds are also growing. Some have moved upstream as they matured, while others continue writing early checks even as the fund scales. Either way, these companies still need follow-on capital available as they grow. So the need for a maturing and more robust capital ecosystem will continue to remain vital.

Broadly reviving activity at this stage depends both on the quality of the pipeline and investors staying active in it.

What is one thing African VC could do differently that would keep more of these companies alive?

Samuel Frank: VC firms should go deeper into venture building.

Amarachi Nwachukwu: We need government to participate, and we need local capital. The fact that we do not have as much local capital as we should is a problem. We need family offices and similar pools to participate more.

But there is a question underneath yours: were the companies that are dying actually funded by African VCs? If you look closely, some of the companies that died raised money from Silicon Valley and other markets. Founders travel, raise abroad, and do not get local support. Investors from outside often stay far away and invest without proper market or founder diligence. Those companies struggle because those investors cannot provide local support. They do not live here and do not understand local policy and compliance.

The African VCs actively deploying and doing well tend to have strong portfolios. Look at Ventures Platform. You can feel the local presence in their investments. I watched a video where a founder from one of their portfolio companies said Kola personally booked a flight and travelled because of them, and that helped the company become one of the biggest fintechs here today.

What should happen is stronger collaboration between foreign investors and local VCs or operators. Founders are not just asking for a cheque anymore. They are asking for access. If I get $50,000 today, what is next? Who else is on the ground? Who has capital for loans? Can local VCs build a bridge to where that capital is coming from? Because both the VCs here and the founders are largely being funded by foreign capital, not local capital.

We also need to get better at designing capital that fits the realities of these companies. Not every startup needs the same cheque size or the same structure. Sometimes the answer is a smaller cheque tied to a specific milestone. There are startups looking for debt or convertible notes rather than equity — that is more of what is available right now. In some cases we do a mix of equity and debt or structure it as a convertible note so that if the business becomes profitable in the future, it converts to debt and bears that cost rather than forcing an equity exit.

Beyond the cheque, we need a stronger relationship with regulators and policymakers to make these markets friendlier for founders to build in. It is genuinely very hard to build here.

Mercy Ndubueze: We need much greater emphasis on capital efficiency from the point of investment. Rather than focusing primarily on helping companies raise their next round, we should help founders build businesses that can survive longer without relying on continuous fundraising. That means being more intentional about burn, margins, revenue quality, and access to alternative forms of financing. The goal should be to build resilient businesses, not just fundable ones.

Pius Bankong: Invest in line with the realities of the continent and the possibilities they present. Some VCs already do this well.

When I think about it, it really goes back to fund strategy. It’s important to understand the investment landscape and where you want to play, and that touches a number of things: building a pipeline, thinking about how exits get engineered, and how capital gets deployed over the life of the fund.

Given where the continent is in its development, fund strategy also has to go beyond deploying a check. It has to include actually supporting these companies to grow. That matters even more in a market that’s still in a somewhat formative stage.

Every market moves through its own phase of growth. Not every market will produce hundreds of unicorns at once, and the size and pace of the rounds being done should reflect the actual size of the market it serves. Early-stage investing remains essential because the industry runs on progress and a degree of novelty, and the role of venture capital is to take well-calibrated risk toward outsized return.

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