African startups are rewriting their funding playbook as the global artificial intelligence boom pulls venture capital toward the US, forcing emerging markets to compete for cash.<\/p>\n
AI-related VC investment doubled to $259 billion last year from 2023, with three-quarters of it flowing to US companies. That\u2019s prompting founders from across Africa to turn to domestic sources such as development-finance institutions, pension funds, debt providers and local VCs.<\/p>\n
The shift accelerates a reset for a startup ecosystem long dependent on overseas growth capital. Investors are now demanding clearer paths to profitability and greater resilience to shocks ranging from war-driven inflation to higher borrowing costs, according to Abakar Mahamat, founder of Telemedan, a healthcare startup in Chad.<\/p>\n
\u201cEarlier, many investors were excited by \u2018Africa growth stories\u2019 and expansion potential alone,\u201d he said. \u201cToday, most want to see operational discipline, unit economics, partnerships, and a path toward sustainability. A lot of conversations shifted from \u2018How fast can this scale?\u2019 to \u2018How resilient is the model?\u2019\u201d<\/p>\n
Geopolitics combined with the lure of AI will likely spur overseas investors to be more selective on the continent, according to the African Private Capital Association, or AVCA.<\/p>\n
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\u201cIn the US you obviously have a lot of homegrown AI that maybe isn\u2019t happening to the same extent in Africa,\u201d Andrew Firman, the Dallas-based managing partner of Kaleo Ventures said on Bloomberg\u2019s Next Africa show. \u201cNaturally, I would expect the numbers to show increases in African investors. US investors are just capturing a domestic opportunity.\u201d<\/p>\n
A Bloomberg survey published Thursday of 25 startups to watch on the continent found that local funders accounted for 47% of commitments while less than a quarter were from the US. Between 2022 and 2024, funding from African investors averaged 23%, according to the AVCA.<\/p>\n
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The rising cost of capital \u201cis making domestic investors say, \u2018well, actually, maybe I should be investing more of my money closer to home and less into these volatile geopolitical environments,\u201d said Tokunboh Ishmael at Lagos-based Alitheia Capital.<\/p>\n
New companies on the continent raised $2.1 billion in equity funding last year, according to AVCA, down 21% from a year earlier. They also raised $1.8 billion in debt \u2013 a 91% increase from 2024.<\/p>\n
The second edition of the startup survey also found that South Africa, Nigeria and Kenya each accounted for 16% of the 25 companies identified as ones to watch.<\/p>\n
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The shift to find local backers may spur innovation in frontier markets, beyond Africa\u2019s major economies.<\/p>\n
Angola is emerging as one of the continent\u2019s fastest-growing technology hubs. Its startup ecosystem grew 70.8% over the past year, according to rankings by StartupBlink, reflecting rising startup activity, investor interest and international visibility. Uganda\u2019s sector expanded 32.5%, while Algeria recorded growth of 38.7%.<\/p>\n
\u201cPreferences continue to centre on Africa\u2019s \u2018Big 4\u2019 economies,\u201d AVCA said in a separate report, referring to South Africa, Nigeria, Kenya and Egypt. \u201cInterest in frontier markets such as Uganda and Senegal signals a measured broadening of investment opportunities.\u201d<\/p>\n
\u00a9 2026 Bloomberg<\/p>\n<\/p><\/div>\n
#Africa #startups #turn #boom #drains #venture #capital<\/p>\n","protected":false},"excerpt":{"rendered":"
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