African Startups Face Profitability Challenges Despite Increasing Capital Raiser
African startups are securing unprecedented levels of funding, yet many are struggling to achieve significant profits. This was the central theme during the Pan-African Insights Panel on Technology Returns and Exits at Moonshot by TechCabal 2025. Key industry figures, including Bancolle Cardoso from venture studio Delta40, Sadaharu Saiki of Sunny Side Ventures, and Esohe Igbinaba from Vencapital, addressed the systemic issues that are restricting liquidity across the continent.
Startup Growth Doesn’t Translate to Liquidity Events
The discussion highlighted a troubling disconnect: although numerous startups are rapidly scaling, very few reach critical liquidity events such as initial public offerings (IPOs), acquisitions, and secondary sales that would enable the recycling of investor capital and reward founders. This gap poses a significant challenge for the growth of the startup ecosystem in Africa.
The Importance of Exits in the Financial Ecosystem
Saiki stressed the necessity of exits in the financial supply chain, noting that not only do startups need funding, but venture capital firms must also secure returns to position Africa as a prime investment destination. He referenced research showing that in 2023, just 30 exits occurred across 54 African nations, compared to 83 in Southeast Asia and 178 in Japan, underscoring the disparity in exit activity. Saiki attributed the success of Japan and India to robust public markets and well-structured IPO systems that facilitate regular capital turnover for investors.
Governance and Financial Discipline as Foundational Steps
Cardoso highlighted that founders aiming to attract strategic exits must prioritize often-overlooked fundamentals, such as governance and financial discipline. Establishing formal committees and advisory boards early can create essential structure and enhance credibility. Additionally, maintaining accurate records and management accounts from the very beginning fosters transparency, which is crucial when appealing to investors or prospective buyers. “Effective governance and sound financial practices are essential from day one to ensure a clear understanding of the business by both founding teams and incoming investors,” he remarked.
Shifts in Deal Structures Amid Slower Global Funding
The panel also delved into the evolving landscape of deal structures. As global venture capital funding slows, debt financing is emerging as a viable solution for many African startups. Panelists observed a growing trend where startups are blending equity and debt to support their growth while awaiting improved exit conditions, illustrating how founders are navigating the current liquidity limitations.
Debt and Equity: A Balanced Approach to Financing
Saiki noted that a combination of debt and equity would represent a significant step forward, stating that the current focus on equity alone is limiting. In certain financing phases, he argued, utilizing debt would be more advantageous. This adaptable approach would better position startups to manage their financial needs while pursuing growth.
Integrating Exit Strategies into Business Design
At the core of the dialogue, the panelists identified a design issue at the heart of Africa’s exit dilemma. They emphasized that exit strategies should be woven into the fabric of a startup’s overall strategy, structure, and capital planning—not treated as an afterthought. By doing so, founders and investors can create an environment more conducive to capital flow, ultimately benefiting the entire ecosystem.
