The African startup funding winter is here — and it’s not just about money

The African startup funding ecosystem is at a critical juncture. After seeing years of glorious highs, rapid growth and billion-dollar valuations, the ecosystem is now facing its biggest funding crunch in a decade.

In 2023 alone, 15 well-funded startups that collectively raised millions in disclosed capital shut down. Add to that massive layoffs and high-profile leadership scandals, and it’s no surprise that investor confidence has taken a hit.

This has had an enormous impact, and the numbers paint a bleak picture. African startup funding in Q3 2024 hit just $306.4 million—a staggering 40% drop from Q3 2023, according to Disrupt Africa

With capital becoming scarcer and investors pulling back, raising capital is more complex than ever. Only the most resilient startups will survive, as securing funding is no longer straightforward. And what’s happening now isn’t just a market correction. It’s a fundamental shift, where capital alone won’t guarantee survival.

Raising capital in Africa is harder than ever

In the current economic climate, raising investment is no longer a walk in the park for African founders. Global inflation, currency devaluation and rising operational costs have made startup economics tougher and forced investors to tighten their grip. 

You may wonder why international monetary dynamics have this much impact on the flow of capital in Africa. One key factor — Africa’s startup boom was fueled by (and still relies on) foreign capital. In 2021, 77% of active investors were from foreign markets. That reliance is now proving to be a liability.

The 2023 “startup bubble burst”, triggered by a mix of overvaluations, investor losses, and leadership scandals, has led to global investor fatigue. Many venture firms have paused African investments altogether, waiting for stronger proof of profitability.

Beyond financial loss and market viability, investors` concerns have extended to behavioural volatilities. They now pay closer attention to founders’ operational expertise, decision-making abilities, and behavioural patterns before committing capital. But even at that,  Africa’s most promising founders are still struggling to close rounds.

Yet capital is still flowing—it’s just going to the “right kind of founders”.

Founders’ behaviour now under the microscope

Recently, economic realities and nefarious activities of a few founders have nudged funders towards a more cautious approach. Investors are no longer just betting on ideas. They’re betting on the people behind them. 

Also Read: African startups shakeout: 6 notable startups that have closed shop or pivoted in H2 2023

Insights from Forbes, The Factory VC and Founders Factory reveal that investors are prioritising founders who embody resilience, strategic execution, and long-term vision over raw innovation. What does this mean? First, the ability to pivot fast, not just in response to trends, but market shocks, then a deep operational expertise; VCs want founders who understand the business beyond the pitch deck. Also, the ability to build strong/adaptable teams; since scaling isn’t just about raising funds but assembling the right talent, and lastly, transparency and governance; founders who are accountable, not just visionary.

Beyond technical skills, investors are digging deeper, asking:

• How well do they take feedback? Are they adaptable or rigid?
• Have they pivoted successfully before? How do they handle setbacks?
• Do they communicate transparently with investors and teams?

Due diligence has also evolved. Funders are conducting behavioural assessments, scrutinising founders’ past roles, leadership experiences,  failures, and leadership styles, and responding to adversity before making commitments. These aren’t just casual coffee chats; they’re rigorous evaluations of a founder’s character, responsibility, and long-term vision.

Founders must now demonstrate having a strong commitment to work, a deeper passion for change, decisiveness, solution-oriented ambition to scale, resilience in the face of market adversities, and adaptability to navigate competitive landscapes and technological shifts. 

Beyond these qualities, investors are paying attention to founders’ ability to listen, learn and actively seek realistic feedback. Behavioural traits among founders have become important indicators of potential success in fundraising and maintaining relationships across the board. At Pitch2Win 2024, Paystack’s co-founder, Shola Akinlade, emphasised that investor-founder relationships now go beyond funding. Founders must actively engage investors, leverage networks, and demonstrate integrity in leadership to secure long-term backing.

The new reality of African startup funding: investors fund people, Not Just Startups

In today’s funding climate, startups don’t fail—founders do. Especially in the early stages, where a startup’s success is directly tied to the founder. Investors don’t just invest capital—they invest their time, networks, and expertise. That is why they are now more selective than ever.

At the crux, VCs are making fewer bets but doubling down on the right founders—those who can weather economic downturns, attract top talent, and scale responsibly.

For African founders as well, the game has changed. Raising capital is no longer about selling the dream. It’s about proving a business can scale, sustain itself and thrive under pressure. Venture capitalists are making fewer bets but doubling down on founders who:

• can build a sustainable, profitable business, not just chase funding rounds.
• have the leadership depth to navigate crises and market downturns.
• understand governance, financial discipline, and long-term strategy.

The African entrepreneurial spirit has always been rooted in resilience and creativity. It’s about finding solutions despite limited or unavailable resources. But resilience alone is no longer enough. Investors want founders who don’t just survive adversity but thrive through it, shaping businesses that drive economic growth and social transformation across the continent.

The era of easy capital is over. What remains is a painful but necessary reset—one where the ability to execute matters more than the ability to pitch. The next generation of African startups won’t be built on hype but on sound strategy, operational efficiency, and strong leadership. The founders who recognise this shift early are the ones who will lead Africa’s next wave of successful ventures.

---

About the Author

Oluwafunmilayo Aliyu is a Finance and Business Growth Expert with extensive experience in investment analysis, capital raising, and operational strategy across sectors like Venture Capital, FinTech, AgriTech, SaaS, and Nonprofits. With a dynamic career that spans startups, international development projects, and corporate finance, Funmi has consistently driven measurable results for organisations across Africa and beyond.

She has worked with globally recognised institutions and early-stage startups, offering expertise in fundraising (equity, debt, and grants), financial modeling, market expansion, and strategic planning. Her unique ability to bridge finance with operations makes her a key contributor in helping businesses achieve sustainable growth and investor readiness.

Funmi is passionate about empowering businesses, entrepreneurs, and mission-driven organizations with the tools and insights needed to scale. She is currently open to new opportunities in venture capital, non-profit fundraising, strategic operations, and impact-driven collaborations.

---

Want to contribute to smepeaks as an industry expert? Send in your pitches via editorial@smepeaks.com