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<\/p>\nAt a major tech gathering in Morocco, startup funders are tightening their belts and looking at debt funding.<\/p>\n
Startup businesses from across Africa convened in Marrakech in April for GITEX Africa, one of the tech industry\u2019s biggest gatherings on the continent. In the cavernous exhibition spaces of the city\u2019s exhibition centre firms demonstrated their technology, learned from like-minded peers and attempted to persuade funders to get out their chequebooks. This was the third year of the continent\u2019s spin-off event from the Gulf Information Technology Exhibition held in Dubai.<\/p>\n
<\/p>\n
Following US President Donald Trump\u2019s global trade war and reduced expectations of global economic growth, the mood at this year\u2019s gathering was somewhat muted, and the data shows why.<\/p>\n
African startups attracted an estimated $2.8bn in new investments across 750 reported deals in 2024. This marks a sharp deceleration from 2023, when startups raised $3.9bn across 930 disclosed transactions, according to a report by Briter, a market intelligence and research firm focused on emerging markets. The value of deals fell by 28% year-on-year while the total number of transactions decreased by 19%, the report reveals.<\/p>\n
Given the tight funding environment, startups have to do ever more to stand out from the crowd, offer attractive investment terms and prove their worth to investors in double-quick time. The days of hoovering up speculative capital based on the promises of future windfalls appear to be drawing to a close.<\/p>\n
Raising capital by offering equity stakes to investors has become an increasingly uphill task for founders and their management teams, compelling many startups on the continent to explore other strategies of funding their growth ambitions.<\/p>\n
Turning to debt<\/strong><\/p>\n One sign of investors feeling less inclined to provide risk capital to startups is the increasing popularity of debt funding, a major topic of conversation among the firms seeking capital at GITEX.<\/p>\n Previously reluctant to take on debt, startups looking out on a constrained funding environment are now opening their minds to the asset class and taking the plunge.<\/p>\n According to a new report by the African Private Capital Association (AVCA), the value of venture debt utilised in tech deals edged higher by 3% year-on-year to account for 37% of total venture capital (VC) deal value in 2024. Venture debt deals representing just 12% of all transactions, highlighting the outsized role that debt is playing in supporting Africa\u2019s tech ecosystem.<\/p>\n \u201cThere is a growing demand for debt as an asset class,\u201d says Dario Giuliani, managing director of Briter, on the sidelines of GITEX.<\/p>\n It is not just venture debt lenders who are helping startups bridge the funding gap; commercial banks, too, are playing an ever more crucial role.<\/p>\n \u201cWe\u2019re seeing a growing number of startups raising debt for things like asset finance,\u201d he tells African Business<\/em>. \u201cThis points to the growing role of traditional lenders such as commercial banks.\u201d<\/p>\n However, early-stage companies that are yet to attain meaningful revenues or build an operational track record have found themselves at a distinct disadvantage. This is because lenders typically steer clear of unproven business ventures with limited assets and earnings.<\/p>\n The upside to this is that many startups have intensified efforts to tighten internal controls and formalise their businesses in order to qualify for much-needed credit facilities.<\/p>\n Blended finance is another opportunity that early-stage startups can tap into, says Giuliani, with grants offered alongside equity and debt financing becoming more mainstream in recent years.<\/p>\n However, he admits that recent moves by major donor nations to slash development aid has dampened spirits.<\/p>\n \u201cSentiment has certainly taken a hit, though we\u2019re still waiting to see how this will play out in terms of the volume of grant funding available to startups,\u201d he says.<\/p>\n Don\u2019t try to replicate Silicon Valley<\/strong><\/p>\n Joojo Ocran, the strategic partnerships director for Africa at Startupbootcamp AfriTech \u2013 a multi-corporate-backed accelerator programme \u2013 sees a silver lining in the current downturn in VC funding. He tells African Business<\/em> that the funding squeeze provides an opportunity for large corporations on the continent to step in and play a more prominent role in Africa\u2019s tech ecosystem.<\/p>\n Africa, he argues, is overly focused on trying to replicate the Silicon Valley VC model, in which vibrant capital markets have created a strong incentive for VC funds to close as many deals as possible, in the shortest timeline conceivable \u2013 often at stretched valuations.<\/p>\n \u201cThe Silicon Valley VC model may be inspiring, but the reality is that it is not well suited to the African context. Our capital markets are far less mature than those in the US, which means that startups here must seek alternatives to traditional venture capital funding if they want to innovate at scale,\u201d Ocran explains.<\/p>\n Startupbootcamp AfriTech champions a model in which, instead of startups relying too much on investments from traditional VCs, they partner with select corporates in the programme to achieve scale in a sustainable fashion.<\/p>\n Some of the programme\u2019s corporate partners include Telecel, Google, BNP Paribas and RCS Group, a major payments company in South Africa.<\/p>\n \u201cWe\u2019re focused on creating an ecosystem where startups and corporate partners can build symbiotic relationships,\u201d Ocran says.<\/p>\n \u201cCorporations benefit from access to innovation, commercial solutions, and even opportunities to expand their M&A [merger and acquisition] pipelines,\u201d he adds.<\/p>\n Ocran argues that this model has led to more of its investee companies growing healthily over the long-term compared with traditional VC models, where he says failure rates are much higher.<\/p>\n Startupbootcamp AfriTech has, Ocran tells African Business<\/em>, helped more than 60 startups raise over $145m in funding; this \u201cportfolio\u201d of companies is, he says, currently worth slightly north of $850m.<\/p>\n He stresses that it all comes down to finding the right fit between a startup and corporates. The two need to be in complementary markets, and there is a great deal of vetting that takes place before a startup is matched with a corporate sponsor, he says.<\/p>\n \u201cWe identify startups that fit the mandates of our partners, and help them to de-risk and refine their value proposition. The goal is to help them create compelling proof of concept projects that provide tangible ROI [return on investment] to partners and help the startups drive sustainable growth,\u201d he says.<\/p>\n \u201cAfrican startups must prioritise profitable, sustainable growth. That\u2019s the message we emphasise.\u201d<\/p>\n People attend the GITEX Africa Tech and Startup show in Marrakesh. (Photo by AFP)<\/em><\/p>\n Investing when others are afraid<\/strong><\/p>\n For Uwemakpan Uwemedimo, head of investments of Fund II at Launch Africa Ventures \u2013 a pan-African early-stage investment firm established in 2020 \u2013 the prevailing pessimism that has engulfed the African tech scene presents an opportunity to capitalise on discounted valuations.<\/p>\n \u201cWarren Buffett usually says to invest when everyone is afraid of investing,\u201d he recalls, arguing that there is a critical need for pan-African funds such as Launch Africa Ventures to continue backing promising founders who are making a significant difference to the ecosystem.<\/p>\n He says the fund is willing to go into areas others are not. \u201cWe come in at the riskiest stage when others are not willing to invest,\u201d he tells African Business<\/em>.<\/p>\n The firm, which he says raised $33m for its first fund and invested in 133 companies, is currently in the midst of a capital raise targeting $75m for Fund II. \u201cWe\u2019ve already started deploying proceeds from our Fund II raise across 20 companies,\u201d Uwemedimo says.<\/p>\n Lina Kacyem, investment manager at the firm, tells African Business<\/em> that the timing is right for capital raising. Valuations, she stresses, have come back down to earth, presenting an opportunity to snap up companies with promising upside potential.<\/p>\n \u201cWhat we\u2019re seeing right now, compared with during Covid, is more of a readjustment in terms of valuation. They are closer to where things should be,\u201d she says.<\/p>\n With a portfolio spanning 150 startups across 22 countries between the two funds, the firm plans to deepen its focus rather than expand geographically. \u201cWe\u2019ll leverage lessons from Fund I, zoning in on<\/p>\n high-potential economies while maintaining our first-mover culture,\u201d Kacyem says.<\/p>\n \u201cFor example, when we talk about francophone Africa, most pan-African VC funds were not even present in francophone countries two years ago, while we have been making investments in those geographies for four to five years,\u201d she says.<\/p>\n \u201cNow people are understanding, because of the stability of the currency, because of how those economies are integrated, that those are interesting markets when you look at them as a bloc,\u201d she adds.<\/p>\n For Fund II, Uwemedimo says the firm will back fewer companies than in Fund I, despite planning to raise more than double the capital. \u201cWe want to write bigger cheques and prioritise follow-on investments,\u201d he says. \u201cWhen our founders grow rapidly, we want to ensure we have the firepower to back them again, so they can focus on building rather than fundraising.\u201d<\/p>\n The key sectors for Fund II will include healthcare, fintech, cybersecurity, agri-tech, electric mobility, and AI applications for African languages. \u201cOur startups must serve consumers across borders, and AI for local languages is a priority,\u201d Kacyem says.<\/p>\n Offering advice to founders keen on scaling up successfully, Kacyem stresses the importance of targeting the right investors.<\/p>\n \u201cDo your homework,\u201d she urges. \u201cUnderstand investors\u2019 priorities, study their portfolios, and talk to other founders who have received money from them about their experiences. Not everyone with a cheque is the right fit.\u201d<\/p>\n Policymakers\u2019 crucial role<\/strong><\/p>\n While it is primarily startups and private sector investors that must challenge the status quo and take the risks needed to transform African tech, policymakers play an equally crucial role: they help establish a robust legal and regulatory framework that promotes innovation at scale and attracts long-term investments that lead to the creation of quality jobs.<\/p>\n Talkmore Chidede, a senior digital trade expert in the African Continental Free Trade Area (AfCFTA) secretariat, emphasises the importance of leveraging the AfCFTA to expand the reach of African tech startups and help them achieve a level of scale that domestic markets alone may not provide.<\/p>\n \u201cTech players in Africa\u2019s private sector looking to expand their continental presence must familiarise themselves with the opportunities presented by the protocol on digital trade,\u201d Chidede tells African Business<\/em> on the sidelines of GITEX. \u201cThe protocol on digital trade is a legal framework that harmonises digital trade rules across all member states of the African Union.\u201d<\/p>\n He notes that the protocol\u2019s general framework, alongside its eight annexes, covers critical areas such as digital identities, interoperability of digital financial systems, and cross-border data transfers.<\/p>\n \u201cIn some African nations it is still impossible to transfer data across borders. Restrictions on cross-border data transfers need to be removed, but this must be executed through secure means that guarantee privacy and protection of personal data,\u201d he stresses.<\/p>\n \u201cThe protocol on digital trade has provisions to support this process, fostering innovation while protecting Africa\u2019s data.\u201d<\/p>\n Although supporting the growth and success of local entrepreneurs is essential for Africa\u2019s digital future, attracting investments from global tech giants is just as important. These firms can help African nations to develop much of the infrastructure that underpins modern digital economies, including building more data centres, improving connectivity, and closing the power access gap for individuals and businesses. To secure these investments from global tech titans, countries across the continent are engaging in novel forms of digital diplomacy.<\/p>\n \u201cIn recent years, technology has gained prominence in international diplomacy,\u201d Philip Thigo, Kenya\u2019s special envoy on technology, tells African Business<\/em>.<\/p>\n \u201cA dedicated envoy is crucial in bridging the gap between industry and government, ensuring effective negotiation on science, technology, and innovation in a world where geopolitics has gotten more complex.\u201d<\/p>\n The dream hasn\u2019t died<\/strong><\/p>\n Still, despite the gaps in policymaking and the reduced appetites of investors, it\u2019s not all doom and gloom. GITEX still offered a platform for vibrant, original startups offering solutions to Africa\u2019s challenges, from fintech to health and agritech. Young, entrepreneurial founders refuse to be downcast by the funding environment which many see as but a passing phase.<\/p>\n Indeed, Briter\u2019s Giuliani argues that early-stage startups need not panic about constrained access to financing or the slowdown in overall VC flows to Africa.<\/p>\n On the contrary, he says that the data shows that there is a steadily growing appetite from VCs and other investors for smaller deals involving younger, promising companies.<\/p>\n He contends that the widely reported headline figures on the funding landscape inadvertently mask this important nuance, attributing this to the disproportionate influence of mega-deals on aggregate transaction values.<\/p>\n \u201cThe ten largest deals every year for the past decade have consistently accounted for more than half of all funding raised, while representing only a tiny percentage of the number of total transactions reported,\u201d he says.<\/p>\n \u201cMost of the deal activity is around smaller deals, and we continue to witness a steady increase in the number of early-stage transactions in Africa, with ticket sizes ranging from $500,000 to $1m representing a larger proportion of all deals closed,\u201d he says.<\/p>\n Abi Mustapha-Maduakor, CEO of AVCA, stresses that Africa had demonstrated \u201cnotable resilience\u201d.<\/p>\n \u201cWhile overall funding has contracted, we\u2019re seeing strategic adaptations \u2013 higher quality deals, sector diversification beyond fintech, increased venture debt utilisation, and the strengthening role of African investors,\u201d she says.<\/p>\n While acknowledging the gravity of the challenges faced by startups grappling with constrained access to capital, Giuliani argues that some of the pessimism surrounding the current funding environment has been overdone.<\/p>\n \u201cIf you zoom out and look at the bigger picture, we\u2019re actually on a pretty solid trajectory over the past decade \u2013 the challenges of the past few years notwithstanding,\u201d Giuliani says.<\/p>\n <\/p>\n At a major tech gathering in Morocco, startup funders are tightening their belts and looking…<\/p>\n","protected":false},"author":2,"featured_media":1424,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4,18,78,62,9],"tags":[],"class_list":["post-1423","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-africa","category-finance","category-fintech","category-morocco","category-technology"],"featured_image_urls":{"full":["https:\/\/eandelmagazine.com\/eandelmagazine\/wp-content\/uploads\/2025\/07\/Screenshot-2025-07-14-at-13-54-12-The-big-funding-squeeze-Can-African-startups-survive-Google-Search.png",785,523,false],"thumbnail":["https:\/\/eandelmagazine.com\/eandelmagazine\/wp-content\/uploads\/2025\/07\/Screenshot-2025-07-14-at-13-54-12-The-big-funding-squeeze-Can-African-startups-survive-Google-Search-150x150.png",150,150,true],"medium":["https:\/\/eandelmagazine.com\/eandelmagazine\/wp-content\/uploads\/2025\/07\/Screenshot-2025-07-14-at-13-54-12-The-big-funding-squeeze-Can-African-startups-survive-Google-Search-300x200.png",300,200,true],"medium_large":["https:\/\/eandelmagazine.com\/eandelmagazine\/wp-content\/uploads\/2025\/07\/Screenshot-2025-07-14-at-13-54-12-The-big-funding-squeeze-Can-African-startups-survive-Google-Search-768x512.png",640,427,true],"large":["https:\/\/eandelmagazine.com\/eandelmagazine\/wp-content\/uploads\/2025\/07\/Screenshot-2025-07-14-at-13-54-12-The-big-funding-squeeze-Can-African-startups-survive-Google-Search.png",640,426,false],"1536x1536":["https:\/\/eandelmagazine.com\/eandelmagazine\/wp-content\/uploads\/2025\/07\/Screenshot-2025-07-14-at-13-54-12-The-big-funding-squeeze-Can-African-startups-survive-Google-Search.png",785,523,false],"2048x2048":["https:\/\/eandelmagazine.com\/eandelmagazine\/wp-content\/uploads\/2025\/07\/Screenshot-2025-07-14-at-13-54-12-The-big-funding-squeeze-Can-African-startups-survive-Google-Search.png",785,523,false],"wpucv-grid-three":["https:\/\/eandelmagazine.com\/eandelmagazine\/wp-content\/uploads\/2025\/07\/Screenshot-2025-07-14-at-13-54-12-The-big-funding-squeeze-Can-African-startups-survive-Google-Search.png",360,240,false],"wpucv-grid-two":["https:\/\/eandelmagazine.com\/eandelmagazine\/wp-content\/uploads\/2025\/07\/Screenshot-2025-07-14-at-13-54-12-The-big-funding-squeeze-Can-African-startups-survive-Google-Search.png",600,400,false],"wpucv-grid-one":["https:\/\/eandelmagazine.com\/eandelmagazine\/wp-content\/uploads\/2025\/07\/Screenshot-2025-07-14-at-13-54-12-The-big-funding-squeeze-Can-African-startups-survive-Google-Search.png",785,523,false],"wpucv-classic":["https:\/\/eandelmagazine.com\/eandelmagazine\/wp-content\/uploads\/2025\/07\/Screenshot-2025-07-14-at-13-54-12-The-big-funding-squeeze-Can-African-startups-survive-Google-Search.png",255,170,false],"wpucv-classic-small":["https:\/\/eandelmagazine.com\/eandelmagazine\/wp-content\/uploads\/2025\/07\/Screenshot-2025-07-14-at-13-54-12-The-big-funding-squeeze-Can-African-startups-survive-Google-Search.png",150,100,false],"wpucv-galary":["https:\/\/eandelmagazine.com\/eandelmagazine\/wp-content\/uploads\/2025\/07\/Screenshot-2025-07-14-at-13-54-12-The-big-funding-squeeze-Can-African-startups-survive-Google-Search.png",400,266,false],"covernews-slider-full":["https:\/\/eandelmagazine.com\/eandelmagazine\/wp-content\/uploads\/2025\/07\/Screenshot-2025-07-14-at-13-54-12-The-big-funding-squeeze-Can-African-startups-survive-Google-Search.png",785,523,false],"covernews-slider-center":["https:\/\/eandelmagazine.com\/eandelmagazine\/wp-content\/uploads\/2025\/07\/Screenshot-2025-07-14-at-13-54-12-The-big-funding-squeeze-Can-African-startups-survive-Google-Search-785x500.png",785,500,true],"covernews-featured":["https:\/\/eandelmagazine.com\/eandelmagazine\/wp-content\/uploads\/2025\/07\/Screenshot-2025-07-14-at-13-54-12-The-big-funding-squeeze-Can-African-startups-survive-Google-Search.png",785,523,false],"covernews-medium":["https:\/\/eandelmagazine.com\/eandelmagazine\/wp-content\/uploads\/2025\/07\/Screenshot-2025-07-14-at-13-54-12-The-big-funding-squeeze-Can-African-startups-survive-Google-Search-540x340.png",540,340,true],"covernews-medium-square":["https:\/\/eandelmagazine.com\/eandelmagazine\/wp-content\/uploads\/2025\/07\/Screenshot-2025-07-14-at-13-54-12-The-big-funding-squeeze-Can-African-startups-survive-Google-Search-400x250.png",400,250,true]},"author_info":{"info":["Saint Rich"]},"category_info":"Africa<\/a> Finance<\/a> Fintech<\/a> Morocco<\/a> Technology<\/a>","tag_info":"Technology","comment_count":"0","_links":{"self":[{"href":"https:\/\/eandelmagazine.com\/eandelmagazine\/wp-json\/wp\/v2\/posts\/1423","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/eandelmagazine.com\/eandelmagazine\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/eandelmagazine.com\/eandelmagazine\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/eandelmagazine.com\/eandelmagazine\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/eandelmagazine.com\/eandelmagazine\/wp-json\/wp\/v2\/comments?post=1423"}],"version-history":[{"count":1,"href":"https:\/\/eandelmagazine.com\/eandelmagazine\/wp-json\/wp\/v2\/posts\/1423\/revisions"}],"predecessor-version":[{"id":1426,"href":"https:\/\/eandelmagazine.com\/eandelmagazine\/wp-json\/wp\/v2\/posts\/1423\/revisions\/1426"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/eandelmagazine.com\/eandelmagazine\/wp-json\/wp\/v2\/media\/1424"}],"wp:attachment":[{"href":"https:\/\/eandelmagazine.com\/eandelmagazine\/wp-json\/wp\/v2\/media?parent=1423"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/eandelmagazine.com\/eandelmagazine\/wp-json\/wp\/v2\/categories?post=1423"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/eandelmagazine.com\/eandelmagazine\/wp-json\/wp\/v2\/tags?post=1423"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Source: African Business<\/em><\/h6>\n","protected":false},"excerpt":{"rendered":"