African venture capital is backing fewer founders than ever

This is Follow the Money, our weekly series that unpacks the earnings, business, and scaling strategies of African fintechs, financial institutions, companies, and governments. A new edition drops every Monday.

Africa’s startup ecosystem raised roughly the same amount of venture capital in the first half of 2026 as it did a year earlier.

Startups across the continent raised about $1.4 billion in the first six months of the year, broadly matching H1 2025 despite a global venture capital market that remains cautious, according to Africa: The Big Deal, a monthly funding tracker.

But a closer look at where the money went tells a different story.

The question is no longer whether capital is flowing into African startups, but where it is going.

Rather than being spread across hundreds of young companies, venture capital is increasingly concentrating in a small group of mature businesses with proven business models and established revenues. The startups raising the largest rounds are attracting more money than ever before, while founders seeking their first institutional backing are finding fewer investors willing to take the risk.

The 30 most-funded startups absorbed 84% of all disclosed capital raised during the first half of the year, according to data from TechCabal Insights. The remainder was shared among more than 100 other ventures.

According to TechCabal Insights, startups secured $1.44 billion across 146 disclosed transactions during the first half of the year. Yet the number of deals fell 42% year on year, suggesting investors are writing fewer but significantly larger cheques.

Mid-sized rounds between $10 million and $99 million accounted for 66% of total funding, while early-stage rounds below $500,000 represented just 19% of all deals, underscoring investors’ retreat from riskier bets.

The shift has been years in the making. In 2020, African startups closed 454 early-stage deals, 38% more than the 282 recorded in 2021, according to TechCabal Insights. Since the first half of 2021, rounds below $500,000 have fallen from 52% of deals to just 19% in H1 2026.

Africa: The Big Deal also found that the number of ventures raising more than $100,000 fell to 190 startups, the lowest tally since at least 2021. The sharpest decline came among companies raising between $100,000 and $1 million, which dropped from 179 startups in H2 2025 to just 100 in H1 2026.

The trend extends well beyond Africa.

The data tracker firm notes that globally, venture capital is becoming concentrated into fewer companies, particularly in markets such as the United States where artificial intelligence continues to attract outsized investment.

For a time, grants helped cushion the retreat in venture capital. Development finance institutions (DFIs) and philanthropic organisations increasingly financed experimentation that private investors had become reluctant to support.

According to Africa: The Big Deal, 2025 recorded the highest number of disclosed grants above $100,000 since 2021, with 160 grants awarded to 154 ventures.

So far, however, 2026 is running well behind that pace. During the first quarter, only 15 disclosed grants worth more than $100,000 were announced, totalling roughly $4 million, compared to 27 grants worth about $20 million during the same period a year earlier.

DFIs remain critical to the ecosystem. Between 2022 and 2024, DFIs accounted for roughly 45% of commitments into Africa-focused venture funds.

That figure fell to 27% in 2025 as global venture fundraising entered a third consecutive year of contraction.

“If grants are meant to help de-risk innovation and keep the early-stage engine running, those Q1 numbers should worry us a bit,” Africa: The Big Deal wrote.

“So, yes: totals are holding up. But the ecosystem’s future is written in the base. And right now, the base is thinning, in small equity cheques, and (so far this year) in grants too. If this trend continues, Africa might still be producing big rounds in 2026, while silently starving the pipeline that produces the next generation of breakout companies.”

Those early-stage rounds rarely dominate headlines because they account for only a small share of total capital deployed. Yet they finance product development, customer acquisition, and market validation, the investments that eventually produce tomorrow’s Series A companies and unicorns.

Some investors are deliberately swimming against the tide.

Launch Africa Ventures, whose portfolio includes more than 180 companies across 25 African countries, completed 15 new investments in 2026, focusing on precisely the early-stage cheque sizes many investors have abandoned.

“If nobody writes that cheque in 2026, there’s no Series A class in 2029,” Uwem Uwemakpan, Head of Investments at Launch Africa Ventures, told TechCabal in July. “We’d rather own that pipeline than inherit someone else’s gap in three years.”

After a sluggish start to the year, June rescued the funding market.

Electric mobility company Spiro announced a $327 million financing round, Flutterwave reportedly secured about $100 million, while MNT-Halan completed another major raise, according to Africa: The Big Deal.

Those transactions transformed what would otherwise have been a disappointing first half into one that appeared broadly flat year-on-year.

Spiro’s financing alone accounted for nearly one-quarter of all startup funding raised during the first half of the year.

While equity remained the largest source of startup capital at $818 million during the first half, debt financing climbed to $614 million across a record 36 transactions, according to TechCabal Insights.

The research outfit argued that founders are increasingly using non-dilutive, asset-backed financing to expand while avoiding further equity dilution.

The rise of debt reflects the changing profile of companies attracting investment. Businesses operating electric vehicle fleets, logistics networks, and energy infrastructure possess tangible assets and predictable revenues that lenders are comfortable financing.

Egypt attracted the most funding during H1 2026, raising $327 million, followed by Nigeria with $254 million, Kenya with $126 million, and South Africa with $83 million, according to Africa: The Big Deal.

Together, the traditional “Big Four” accounted for 58% of total funding. Looking only at equity investments, however, Nigeria led the continent with $214 million, ahead of Egypt’s $183 million. South Africa and Kenya trailed with $66 million and $46 million, respectively.

Beyond the Big Four, Tanzania, Côte d’Ivoire, and Morocco each attracted more than $25 million in total funding during the first half of the year.

Among startups raising at least $100,000, Nigeria remained comfortably ahead of its peers, with Egypt and Kenya closely matched and South Africa slipped to fourth place.