Africa's startups need significant exits for growth

In Lagos, Nigeria, a summit of venture capitalists highlighted the need for significant exits to enhance Africa's startup ecosystem. Shruti Chandrasekhar, head of the Africa private equity division at the International Finance Corporation (IFC), emphasized that investors must begin realizing returns on their investments to facilitate growth in the region. She noted that the acquisition of Nigerian fintech Paystack by US company Stripe for approximately $200 million five years ago was a pivotal moment that should be emulated across the continent. Despite several notable exits in countries like South Africa and Kenya, the overall number remains insufficient to foster a robust investment landscape. Investments in African startups have surged, with a record $2.2 billion raised in 2024 alone through various funding sources. This remarkable feat included 188 ventures securing $1 million or more and 22 exits being recorded. Yet, the private equity market struggles with delivering competitive returns, largely due to currency devaluations throughout the continent. The technology sector, despite its rapid advancements, still lacks a significant number of acquisitions or initial public offerings (IPOs), which are essential for unlocking greater capital flows. Andrew Alli, a seasoned investor at British International Investment, underscored the importance of forming exit strategies at the outset of investments, a practice that should become standard in the region's financial strategy. He pointed out that a meaningful discussion about enhancing local capital markets is necessary to support the occurrence of more exits in the long term. Alli also mentioned that there had been some successful exits in recent years that returned substantial capital to investors, suggesting that there is potential in the ecosystem for such activities to continue growing. Kola Aina, from Ventures Platform, identified that while Nigeria has observed strategic acquisitions, many of these were secondary exits, where investors sell their stakes rather than direct public offerings. He warned that without an increase in IPO opportunities over the next five to seven years, this could lead to congestion within the investment ecosystem, further stifling potential growth and returns. Meanwhile, Flutterwave's CEO hinted at the potential for selling his company to a larger entity, showcasing the ongoing tension between seeking strategic partnerships and achieving profitability as a priority.