Across the vibrant landscape of African tech, news of fresh funding rounds for startups bursts forth with reassuring regularity. Last year, despite what many deemed a “funding winter,” the continent’s burgeoning ecosystem still trumpeted over $2.2 billion in investment. These announcements, splashed across tech news outlets, paint a picture of robust growth and investor confidence. Yet, behind the fanfare of celebratory headlines, a more sobering narrative is unfolding.
While the aggregate figures suggest resilience, anecdotal evidence and mounting startup closures point to a critical disconnect: the gap between announced funding and actual capital reaching company coffers. For some, this gap is a chasm of outright deception. Zimbabwean fintech Payitup, for example, made headlines in 2019 with a purported $13 million injection from UK-based Thawer Fund Management. For a nation grappling with hyperinflation, this seemed a lifeline, poised to propel Payitup beyond its initial remit of processing payments for everyday utilities and into a more ambitious future. But that future never materialized. Within a year, Payitup vanished, a ghost in the annals of African tech ambition. “It was all a hoax,” alleges Franklin Peters, founder of Bitfxt, who faced a similar phantom funding experience in 2020, also linked to Thawer Fund Management and a supposed $15 million round. “We waited to receive the funds to proceed with our operations, but not a penny came through,” he recalls, highlighting a stark lack of transparency that casts a shadow over certain corners of the funding ecosystem.
However, the issue extends beyond potential fraud. Far more prevalent are cases where seemingly legitimate deals, celebrated with press releases and founder endorsements, crumble after the initial excitement fades. The recent demise of Kenyan B2B marketplace MarketForce serves as a stark illustration. In 2022, the company, focused on end-to-end distribution, proudly announced a $40 million Series A round. Led by V8 Capital Partners and boasting participation from a roster of reputable investors including Ten13 VC and SOSV Select Fund, the deal was hailed as “the largest Series A round in East and Central Africa.” Cellulant co-founder Ken Njoroge even joined the board as chairman, further cementing the perception of a landmark achievement.
Yet, barely two years later, MarketForce was fighting for its survival. The very capital injection that promised expansion and stability proved insufficient to weather unforeseen headwinds. “We did not anticipate the ‘funding winter’ that struck,” admitted co-founder Tesh Mbaabu, acknowledging the broader economic downturn impacting tech valuations and investor sentiment. Even a subsequent crowdfunding attempt failed to avert the inevitable. By April 2024, MarketForce, a company once brimming with promise and flush with announced capital, shuttered its doors. In a poignant reflection, Mbaabu lamented, “It hurt us when the committed capital didn’t fully come through.” He concluded with a sobering assessment of the venture capital landscape, “Venture capital is not for good or even great companies; it’s for those that produce outsized returns at the right time. We got this completely wrong.”
This raises a crucial question: why do publicly announced and seemingly committed funds fail to materialize in startup bank accounts? British International Investment (BII), formerly the CDC Group, offers some insights into the mechanics of cancelled commitments. The development finance institution, a significant player in African investment, clarifies that “commercial, contractual, economic, financial, or regulatory circumstances may occasionally necessitate the cancellation of a commitment.” BII emphasizes that such cancellations “should not be taken to imply that British International Investment regards a company or project negatively,” but rather reflect “unforeseen” shifts in project viability, political environments, or the company’s ability to secure alternative funding. While BII maintains transparency by listing cancelled commitments on its investment database, the impact on affected startups can be devastating.
Egyptian fintech Cassbana, specializing in AI-powered financial identities for the unbanked, experienced this firsthand. Despite attracting over $1 million from a consortium of investors and demonstrating initial promise, a cancelled $2 million commitment from BII proved a critical blow. The repercussions were significant, leading to operational stagnation and the departure of founding co-founders. Mohamed Tarek, former Cassbana co-founder, now at social commerce startup Taager, offers a cautionary tale: “Exercise caution in premature celebrations. Don’t build plans on funds that didn’t hit your bank yet, (24Hrs changed a complete plan for us).” His experience underscores the fragility of announced funding and the critical importance of investor due diligence. “Select investors meticulously,” Tarek advises, “the true value of supportive investors shines through in challenging times.”
The spectre of cancelled BII commitments extends beyond Cassbana. Nigerian mobility fintech Moove, which democratizes vehicle ownership across Africa, announced a $20 million financing round from BII in 2022. This investment was intended to fuel expansion in Nigeria and strengthen its product offerings. However, this deal, too, has reportedly fallen through, listed as a “cancelled commitment” on BII’s platform. While BII’s reporting mechanism allows for complaints regarding breaches of responsible investing principles, the immediate impact on Moove remains unclear.
Even startups with seemingly solid initial traction are vulnerable. Troubled insurtech OKO Finance, operating in Mali and Uganda, which had already faced funding challenges following the closure of USAID programs, announced a $1.2 million raise in 2021 from Newfund and ResiliAnce. This was earmarked for African expansion. However, further fundraising efforts have reportedly stalled, leaving the startup heavily reliant on earlier, smaller investments. “We survived COVID-19, we survived the war in Israel, but we might not survive…,” remarked Simon Schwall, CEO of OKO, recently, hinting at the precarious financial tightrope many African startups are walking.
These individual cases are symptomatic of a wider trend. Recent high-profile failures of African startups like Marketforce, iProcure, Copia Global, and Gro Intelligence, despite significant funding raises, have further rattled investor confidence. Investors in African startups are increasingly cautious with their funding activity, observing market dynamics play out before fully disbursing committed capital. While smaller funding rounds may experience fewer cancellations, larger, “heavy ticket” deals appear disproportionately susceptible to retraction.
For founders, the emotional and operational fallout from cancelled funding commitments can be devastating. “It could be crippling, and is an instant killer,” recounts one anonymous founder whose startup succumbed to this fate. “You have to take time to face the trauma and the depression after the whole events have unfolded.”
In a volatile investment climate, some startups are resorting to increasingly stringent measures to secure committed capital. Egyptian transport startup SWVL, facing investor exodus after its Nasdaq listing faltered, recently implemented lock-up agreements for a $2 million private placement. These agreements restrict share transfers and trading volumes for six months, attempting to impose a degree of stability in a turbulent market. While legal mechanisms like lock-up agreements, no-shop clauses, and force majeure carveouts exist, startups often lack the bargaining power to effectively leverage them, particularly if they are not underpinned by significant proprietary technology or market dominance.
Perhaps the most effective immediate step to mitigate the misleading hype surrounding funding coming to African startups is to recalibrate reporting practices. Focusing less on announced rounds and more on verifiable capital inflows — funds demonstrably deposited in known bank accounts — would offer a more accurate and grounded assessment of the continent’s tech funding landscape. Until then, the celebratory headlines may mask a more precarious reality, where the champagne corks pop prematurely, and the promised funds remain tantalizingly out of reach.