Why only 26 African startups raised $174 million in January
African startups raised $174 million in January 2026, trailing last year’s tally by $102 million and well below the 12-month monthly average of $263 million, according to Africa: The Big Deal, a monthly funding tracker.
While a month-on-month dip from December to January is routine in African venture capital (VC), what stands out this January is how few startups raised money, with only 26 startups raising above $100,000, just over half the recent monthly average and the lowest January tally since at least 2020.
The data reveals how narrow Africa’s VC funnel has become and how unforgiving the path ahead may be for African startup funding.
Over a third of the month’s funding went to Egypt’s lending startup, valU, which raised $63 million in debt from a local bank. Nigeria’s MAX, a vehicle financing startup, followed with $24 million in a mix of equity and asset-backed financing. The two transactions accounted for half of all capital deployed in January.
Neither deal reflects risk-seeking venture capital, as they are structured around lending books, assets, and predictable cash flows. Instead, they emphasise a pattern of investor comfort with revenue and collateral and a clear unease with uncertainty, the very condition that defines early-stage startups and venture capital.
“After a decade of asset-light evangelism, 2026 will mark the return of the balance sheet as a competitive advantage,” Olivia Gao, a principal at Verod-Kepple Africa Ventures (VKAV), a growth-stage VC firm, told TechCabal.
“Startups that own or finance productive assets—vehicles, devices, and equipment—will outcompete pure marketplaces by controlling supply, monetising financing margins, and unlocking private credit partnerships,” she added.
What does this mean for African startup funding
If you strip out those two rounds, January looks very different. There was very limited equity activity, few first-time raises, and almost no early-stage momentum.
The month reflects a deeper problem in African VC as the industry drifts toward safety. In the search for predictable returns, many firms are backing proven, familiar business models, with little appetite for riskier bets.
African startup funding is beginning to look more like credit underwriting than long-term experimentation.
This shift compounds an existing funnel problem in African tech. Many early-stage startups are already stuck in a capital valley, unable to raise growth-stage funding. If risk aversion now seeps further downstream, into pre-seed and seed investing, the damage will surface in 18 to 36 months.
Fewer companies will have been funded, even fewer will reach Series A readiness, and exits will become scarcer, shrinking the ecosystem over time.
As capital becomes more conservative, founders will be forced to optimise for early cash generation and focus on smaller, local markets, where expansion costs are lower. While this may produce leaner, more disciplined, and more profitable businesses, it also narrows the pool of venture-scale bets that deliver outsized outcomes and define a thriving startup ecosystem.
It can be tempting to frame this shift as rational adaptation. Inflation is high, exits are scarce, and as the life cycle of funds ends, limited partners are demanding returns. Some African investors can argue that investing in asset-backed, cash-flow-driven models is a rational adaptation to these macro conditions and not a failure of imagination, but that thinking goes against what venture capital is.
If this safety approach were prevalent during the boom of the early 2020s, startups like Paystack, Wave, and Moniepoint would likely never have raised their earliest institutional rounds. When safety becomes the organising principle of an emerging-markets risk capital, improvement at scale does not happen.
Crédito: Link de origem