Written by: Chikaodinaka J.O & Dipo Adagbada
For a long time, African startups have faced the challenges of not only establishing thriving businesses but also building ones that can adapt to exceptionally volatile, uncertain, complex, and ambiguous market conditions. As Tomi Davis, Collaborator in Chief at TVC Labs and former President of the African Business Angel Network (ABAN), noted, Africa is not a homogeneous market, with its diverse cultures, languages, and socioeconomic differences.
In addition, the regulatory landscape, which tends to favor the government of the day and its allies, varying legal frameworks, compliance policies, business funding, and infrastructural development, are some of the hurdles African startups must face. This is even more challenging for digitally driven models that most startups operate post-COVID. Navigating these complexities internally and across national borders can have significant cost implications, and startups do not have the time to relearn the ropes at every turn, as they are expected to take off quickly under pressure.
These challenges are more systemic than structural for startups, but they are not without solutions. As we continue to observe recent developments in startup expansions through cross-border acquisitions, regional initiatives from the African Development Bank, the African Continental Free Trade Area (AfCFTA), and the African Union’s Programme for Infrastructure Development in Africa (PIDA)—despite its slow progress—as well as private sector efforts in facilitating funding, human capital development, and establishing incubators and business accelerators, much remains to be done. At Capital Dipor-Exzie, we believe that African startups can better navigate their early stages, scale effectively during their first three to five years, and evolve into legacy businesses by focusing on the following considerations.
Data Sharing Network for Startups.
Real-time information relevant to the diverse African economic climate will be a game-changer for the future of the startup ecosystem. New market entrants can leverage verifiable data sources to understand new terrains where others have succeeded or failed. Even mid-stage players can learn from industry leaders in their sectors about sustainability strategies while maintaining profitability. Although this data exists, it remains fragmented. In sectors where it can be aggregated, data is often viewed as a competitive advantage rather than a tool for collective growth. This approach is unhealthy at a time when the success of startups across the continent is urgently needed—not as a point of pride, but for the sake of economic stability and employment.
The Tony Blair Institute for Global Change recommends establishing a data-sharing platform for tech startups, achievable through a single digital market prioritized based on the implementation of the AfCFTA, in its publication on supercharging African startups on the path to tech excellence. Setting up regulatory and legal frameworks that clearly define boundaries for infringement, disclosure, and the protection of intellectual property, supported by the full weight of the law as a deterrent and possible industrial-scale sanctions for defaulters, can help foster a more relaxed environment on the subject.
Founders/Shareholders and Policy Leaders Interactions.
Given the significant impact of policies on the survival of start-ups in recent years, stakeholders in the ecosystem must stay ahead of regulatory changes that directly or indirectly affect their chances of scaling or consolidating. Bike-hailing startups O-Ride, Gokada, and Max.ng were on track to revolutionize transportation in the bustling city of Lagos when the state government implemented a ban in January 2020 on motorcycles on highways and major inner roads in the city. This development crippled a subsector of the ride-hailing industry that was poised to contribute to the projected market value of $380 million by 2028, according to Statista.
The government spokesperson on the Lagos State transport sector told BusinessDay newspaper that the ban was implemented based on a sector reform law passed in 2018. Although the referenced law restricted motorcycles from operating on major highways in the state, it made an exception for motorcycles with an engine capacity above 200cc. Stakeholders can stay ahead of policy development and enforcement through regular engagement with government agencies to anticipate these changes in the future.
Collaborations with Industry Leaders
Rather than competing with industry giants and pioneers who established themselves before the startup boom, stakeholders can leverage existing networks to enter the market and avoid the increasing costs of building from scratch. A mutually beneficial partnership can be formed where startups contribute technology while industry leaders provide access to their physical infrastructure in remote areas for greater reach. For example, we must move beyond the unspoken rivalry between fintech startups and traditional banks if we are to achieve the goal of banking the unbanked in record time.
Incubators for Entry, Growth, and Compliance.
Beyond funding, existing startup accelerator programs can be enhanced to focus on market entry, growth strategy, and compliance, providing beneficiaries with industry and cross-sector insights tailored to their business models. To help African startups navigate their growth phases and build sustainable businesses, we must look beyond short-term returns on investment and quick exits. Instead of spending hundreds of thousands of dollars on software development and fancy offices, access to experienced personnel through a strong Board of Advisors, as well as partnerships and alliances with local and international industry veterans and consultants, can guide founders in the right direction.
Funding Pipelines for Early and Post-early Stage Startups.
Funding for African startups peaked in 2023. According to Tech Cabal, startups in the tech ecosystem raised $3.4 billion across 502 deals, with a 72% increase in M&A activity, and are moving toward achieving profitability and sustainable scale. While the fintech sector continues to lead by raising $1.3 billion ahead of other sectors, we need to intentionally direct the pipeline so that other key sectors can become equally attractive for investments without being pressured into failure. Venture capital fueled rapid growth, but alternative funding in the form of government-backed grants remains underutilized. For instance, only 10% of startups in Africa reported access to non-dilutive capital in 2024. Funding is critical for the growth of the ecosystem and should be distributed across sectors that contribute to a robust economy. Startups in critical sectors like health, agriculture, education, communication, and transportation also need access to investment opportunities that do not stifle innovation or limit their potential reach.
Africa is the future. This has long been a statement of hope rather than a statement of fact, even though all the evidence supports it. For this vision to become reality, the continent must awaken and demonstrate a serious commitment to its own development and, subsequently, to global progress. We are beginning to see this becoming the norm, and it is truly impressive. On all fronts, large numbers of young people are engaging in entrepreneurship and content creation, signaling a drive for independence and financial autonomy at a micro level. The responsibility now lies with governments and institutions in the region, as well as the global community, to provide the necessary support—not just financially, but through guidance and experience.
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2 responses to “PIVOTING THE TRANSITIONING OF AFRICAN STARTUPS: THE CAPITAL DIPOR-EXZIE APPROACH.”
I really don’t think African start-ups should focus only on businesses that run on the internet. There are numerous challenges happening off the net. Creating wide gap and opportunities
Explains the terrain well.