A fresh analysis of Africa's startup landscape has raised alarms over a sharp and continuous decline in early-stage, pre-seed investors, threatening the continent's innovation pipeline. Despite this downturn, Nigeria, alongside Kenya, South Africa, and Egypt, continues to dominate the limited capital flows.
A Critical Gap in Africa's Startup Foundation
The latest data from Africa: The Big Deal, highlighted by Grégoire de Padirac of Digital Africa, shows that pre-seed funding is dangerously scarce. This initial capital, which helps transform ideas into prototypes and build early teams, represented a mere 1.5% of total venture investment on the continent in 2025. This figure starkly contrasts with the 4% to 6% typical in mature markets like the United States.
De Padirac, whose firm was the most active investor by deal count in 2025, emphasized that pre-seed financing is the backbone of African innovation but is often overlooked amidst news of larger funding rounds. "It typically finances incomplete teams and rudimentary prototypes, precisely where capital is scarcest," he noted. While founders in other regions often rely on personal savings or 'love money' from friends and family, these resources are far more limited for African entrepreneurs.
Investor Exodus and Geographic Concentration
The report details a concerning retreat of early-stage backers. The number of active pre-seed investors fell to 135 in 2025, down from 155 in 2024 and 200 in 2022. Investment velocity also slowed, with investors averaging 3.6 deals per year compared to 5.9 in 2022.
This shrinking pool of capital remains heavily concentrated. Nigeria, Kenya, South Africa, and Egypt—the "Big 4"—captured nearly 60% of all pre-seed investment. In 2025, 281 startups secured pre-seed rounds totaling $46.5 million, a figure virtually unchanged from 2024 even as the broader African VC market grew by 40%.
The sectoral focus mirrored broader economic needs, with Fintech and Agriculture & Food attracting a significant share of deals. Healthcare, logistics, and energy also saw substantial activity. Conversely, deeptech, waste management, and housing were underrepresented due to higher perceived risk and capital intensity.
The $120 Million Annual Bridge Required
The crisis has been exacerbated by the withdrawal of major players. Between 2019 and 2025, the exit of investors like Techstars, Y Combinator, and the Google Black Founders Fund, combined with the repositioning of others, reduced private pre-seed investment capacity by over 60%. European public actors from Germany, the UK, and France have stepped in to partially fill the void.
De Padirac described African pre-seed investment as being in a blind spot: too small for large-scale state policies, too risky for private investors, and anomalous in traditional development frameworks. To build a robust ecosystem, he argues at least 3% of total financing—roughly $120 million yearly—should flow to pre-seed, supporting about 800 startups.
"Bridging this immense gap will require a hybrid architecture," he stated. This model involves catalytic public capital to prime the pump, intermediated by specialized funds managed with private-sector discipline, designed to guide startups toward stages that attract private investment.
