Over the past few years, African venture capital has experienced dramatic highs and lows. We saw an incredible surge from $1 billion in 2018 to $4 billion in 2021, a time of optimism and momentum. But today, we’re heading back to a more cautious reality, $1 billion or less annually, while high-profile failures raise questions about the sustainability of the VC model in Africa. So, what’s really going on?

The challenge: too much noise, not enough “signal”

The African startup ecosystem is drowning in noise. Every funding round, valuation shift, or investment announcement grabs a headline. But if we look beyond the media buzz, are we really understanding the health of the ecosystem? Are we focusing on the metrics that actually matter?

For the past six years at Raise, we’ve spoken to thousands of African founders, investors, lawyers, and regulators, and one theme has become clear: despite all the data out there, the essential insights are getting lost in the noise. Fragmented information and a lack of context have left founders without the insights they need to make sound financing decisions, investors without clarity on market trends, and policymakers unsure where to intervene. That’s why we started “Signals”.

What is “Signals”?

Signals is a new data-driven content series designed to cut through the noise and focus on what really matters. We’re not just interested in the surface-level metrics you often see in headlines. Our mission is to provide critical, often-overlooked data that paints a fuller picture of the African startup ecosystem.

We’ll be exploring key topics that go deeper than funding amounts and valuations:

• Revenue multiples on valuation: How do African startups’ revenue streams measure up against their valuations as they scale?

• Dilution across funding stages: What do different financing rounds mean for founders’ and investors’ long-term ownership and returns?

• Use of various financing instruments: How are African startups creatively leveraging solutions like SAFEs, convertible notes, and venture debt to grow?

• Performance of stock option plans: Are ESOPs and stock options creating real value for employees and aligning teams with company growth?

• Liquidity trends in private and public markets: What are the biggest liquidity challenges facing African startups, and what could potential solutions look like?

• Macroeconomic impacts on private equity: How do broader economic trends shape the African VC environment?

Why now?

Here’s the uncomfortable truth: Despite the influx of over $6 billion into African tech in the last five years, the ecosystem is still starved for liquidity. This sharp contraction in funding from $4 billion in 2021 to less than $1 billion projected for 2024 means that capital is scarcer, valuations are under pressure, and founders are struggling to close rounds. Traditional metrics like funding amounts or unicorn valuations no longer tell the whole story. They mask the real issues that we need to confront.

With Signals, we’re shifting the conversation from flashy numbers to realities that matter, dilution rates, revenue multiples, and the impact of macroeconomic trends on startup performance. We’re making sense of the chaos so that founders, investors, and policymakers can focus on building a sustainable future.

Who benefits and how?

Every edition of Signals will feature a clear, data-driven graph, a concise explanation of its significance, and a prompt to discuss potential solutions. Here’s how Signals can support different stakeholders:

• For founders: Understand how your financing decisions impact your long-term ownership and control. Compare your performance with industry benchmarks and plan your next move confidently.

• For investors: Make more informed decisions with insights into key market trends. Identify opportunities early and avoid the common pitfalls that can derail investment strategies.

• For operators: Measure your company’s financial health against others in the ecosystem. Find opportunities for optimization and strengthen your operational strategies.

• For policymakers: Identify gaps and areas where policy interventions can support sustainable growth and drive meaningful impact in the startup ecosystem.

We combine public data with anonymized private information from cap table platforms like raise.africa, providing a comprehensive, nuanced view of the African VC ecosystem. This approach ensures our insights are accurate, reliable, and most importantly, actionable.

With Signals, we want to go beyond the headlines to provide a clear, realistic view of the African VC ecosystem, highlight critical areas that need immediate attention to strengthen the ecosystem, and spark meaningful conversations on building a more sustainable and transparent startup environment.

We believe that by bringing these overlooked insights to light, we can help refocus the ecosystem’s attention on what truly matters, building resilient companies, making smart financing decisions, and fostering an environment where African startups can thrive.

We invite you to engage with the data, share your thoughts, and contribute to the conversation. 

Together, let’s move beyond the noise and find the signals that truly matter.

Subscribe to the newsletter today.