Africa\u2019s early-stage startups are facing a new funding squeeze as venture capital firms increasingly prioritize backing proven companies over riskier young ventures in a bid to deliver returns to investors.<\/p>\n
In the first half of the year, African startups raised around $1.4 billion, on par with the same period last year. But the number of deals<\/a> fell sharply<\/a>, according to separate fundraising tallies by Africa: The Big Deal, and TC Insights, raising average check sizes as a result. Beneficiaries of this trend tend to be later-stage companies with strong revenues, scale, and a firm handle on customer needs, rather than seed and series A startups that are still formulating their strategy, investors told Semafor.<\/p>\n The focus away from the early stage is expected because \u201cexit discipline has become a credential rather than a footnote\u201d for African investors, said Ibrahim Sagna, executive chairman of Silverbacks Holdings, an investor in this week\u2019s $250 million round<\/a> by Moove, the Lagos-born Waymo fleet manager. His firm banked its 10th exit earlier this year when Nigerian payments provider Flutterwave<\/a> \u2014 in which it is an investor \u2014 acquired Mono<\/a>, another Silverbacks portfolio company. \u201cFewer, better vetted bets\u201d on growth-stage African tech companies will define the ongoing VC cycle, Sagna said, concentrating capital in businesses that are guaranteed to generate cash flow.<\/p>\n African VC fund managers are \u201ccoming under a lot more scrutiny in terms of cash returns, not just paper performance,\u201d Justin Stanford, partner at South African early-stage investor 4Di Capital, said. Investors are being more discerning when assessing startups for realistic exit timelines, he said, \u201cpushing managers to be more later stage\u201d and dampening early-stage deals. 4Di, which backed AI-enabled agritech Aerobotics and Kenyan ecommerce logistics startup Wasoko in their earliest funding rounds, is preparing to raise a larger warchest that will succeed its current $20 million fund. But, as part of a revised thesis for better returns, the firm is considering taking up stakes in later-stage startups by buying out existing investors through secondaries, Stanford told Semafor.<\/p>\n