Financing of start-ups

More than 26% of project leaders have no access to any funding.

Types of financing used by startups in Africa[in %, 2015]
There are many reasons for these difficulties:
  • Access to finance is considered very difficult by 87% of startups in Africa
  • Weak development of financing options dedicated to startups (seed/venture capital, business angels, crowdfunding).
  • Heavy bank guarantees required: high risk aversion of African banks, requiring significant guarantees and weak guarantee support mechanisms.
  • Interest rates applied by banks or microfinance institutions considered too high.
Source : 1) Survey of startups in Africa by The Tony Elumelu Foundation

These participatory financing methods are developing, particularly in East and South Africa. They are perfectly adapted to the specificities of the continent, with a large diaspora and financial resources. The main problem lies in access to means of payment.

Business Angels

Unlike developed countries, African countries’ legislation does not provide for clear valuation schemes for companies during the early stages of development or exit options for investors, thus limiting the enthusiasm for this type of investment.

Seed Capital Fund / Risk

With the exception of South Africa, which has a level of maturity close to that of developed countries, funds specialising in Seed Capital and Venture Capital are virtually non-existent on the continent.

Other organizations

Incubators and accelerators, entrepreneurship promotion organizations can provide small initial funding for projects with high potential.

However, the limited access of these organizations to sustained and substantial funding limits their ability to support.