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African startups face more stringent investment scrutiny compared to their global counterparts, with investors requiring greater proof of traction, performing more thorough financial audits, and often overestimating the risks associated with the region. Angel investors point to Silicon Valley in the US, home to many of the world’s leading tech startups, as the most founder-friendly region for raising capital, especially when compared to emerging economies like Africa.
“The process for African startups often seems more focused on finding reasons not to invest, rather than assessing their potential,” said venture capital strategist Tayo Olowu, in a statement obtained by The PUNCH. Olowu, who has conducted due diligence on over 50 venture deals since 2020, highlighted that African founders regularly face stricter requirements than their counterparts in Silicon Valley, London, or emerging markets like India and Brazil.
A US-based startup can secure millions in funding based solely on an idea and a strong founding team, while an African startup often needs to demonstrate significant revenue before attracting serious attention, according to Olowu.
Despite these hurdles, African startups are still drawing investment, though at a slower rate. As reported by Africa: The Big Deal!, a platform that monitors startup funding on the continent, African startups raised nearly $300 million in January 2025, with about 40 companies securing $289 million in funding.
However, this comes in the context of a 25% drop in overall startup funding in 2024, with African startups securing $2.2 billion, down from $2.9 billion in 2023. This decline reflects growing investor caution and the increasing difficulty startups face in securing capital.
Kenya, Nigeria, Egypt, and South Africa continue to lead the investment landscape in Africa, securing 84 percent of all startup funding in 2024, a trend that mirrors the previous year.
“Silicon Valley remains the most dependable location for startup fundraising, providing founder-friendly terms that other global startup hubs find difficult to match,” said Andrew Chen, General Partner at Andreessen Horowitz.
Andreessen Horowitz, a venture capital firm based in California, supports entrepreneurs who are shaping the future through technology and has invested approximately $45 billion in capital across various funds.
While cities such as Austin, London, Miami, Paris, and Sydney are emerging as growing startup ecosystems, Chen pointed out that they still lack the investor scale necessary to secure successful fundraising rounds.
“In recent years, it has become popular to say that you can launch a startup from anywhere. But building a startup is much more than just launching—you need to secure financing,” Chen explained.
“I believe that the only rational place for founders to raise money is in Silicon Valley, especially if you’re looking for funding with founder-friendly terms,” he wrote in a post on LinkedIn.
For Africa, the gap arises from a combination of outdated risk perceptions, stringent financial scrutiny, and a lack of trust in African markets.
Many investors view Africa as a high-risk environment due to factors like political instability, currency fluctuations, and infrastructure challenges, even though these issues are not exclusive to the continent. This increased caution results in more rigorous due diligence, with African founders often facing thorough financial audits, extensive legal checks, and in-depth background investigations. “At times, it feels more like forensic investigations than standard investment evaluations,” Olowu remarked.
He also urged African venture capitalists and angel investors to set an example by supporting local startups without imposing unnecessary obstacles. According to Olowu, a display of confidence from African investors would send a strong message to international capital.
Startup advisor Brandon Solomons highlighted that African venture capital firms remain highly risk-averse due to the region’s lower capital availability compared to global markets, a trend that restricts funding for early-stage startups.
“I’ve been trying to understand the level of risk aversion for a while now, especially considering that African markets require significant early-stage support, even for pre-seed startups,” Solomons said.
He attributed this cautious approach to resource limitations, pointing out that the average African VC manages $50 million in assets under management, a stark contrast to the $324 million average for Asian VCs.
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