Pula and S2E want to solve Africa’s startup problem with British aid money

For years, investors in African tech have grappled with a question: how to return capital within a fund’s seven to ten-year lifecycle. On a continent with few public examples of venture-scale exits, that question has grown more relevant in recent years as many African venture firms approach the end of their first fund cycle.

Kevin Simmons, principal for catalytic investments at FSD Africa, a Nairobi-based development agency funded by British aid, spent years at LoftyInc Capital, an early-stage African venture capital firm, observing the problem across a portfolio of more than 165 companies.

“We’ve had some struggles exiting some of those businesses,” he told TechCabal in an interview. “We’ve done well on many, but increasingly it became clear when we started to take an ecosystem look that there just wasn’t enough.”

Some investors have found workarounds, selling shares in startups to each other. Secondaries accounted for 23% of exits in 2025, the highest share on record, as funds sold stakes to other funds rather than waiting for a company to buy startups. Foreign acquirers, meanwhile, who once absorbed much of the exit activity, have pulled back sharply—from 56% of exits in 2020 to 33% in 2025.

FSD Africa is trying to build a permanent appetite for startups among companies across the continent. Rather than investing in the deals themselves, it is backing S2E Africa, a consultancy run by Pulkit Srivastava to create this appetite. S2E Africa identifies African companies willing to grow by acquisition, assesses targets, walks them through deals, helps build in-house mergers and acquisitions (M&A) capability, and documents the process.

Simmons described the arrangement as an early pilot, run on a handful of companies so the lessons can be passed to other corporates later. The bet is that if African companies learn to buy startups, the ecosystem stops waiting on foreign acquirers.

S2E is helping Pula find its next acquisition

S2E currently has three clients, but Pula, the agricultural insurance company operating across 13 African governments, has drawn the most attention. The startup is weighing a stock market listing or a trade sale within three years and is actively assessing acquisitions to bolster its balance sheet ahead of the planned exit.

The company adopted this strategy after witnessing the impact of a second revenue stream. For its first seven or eight years, Pula sold agricultural insurance exclusively to African governments. Then, ministries began requesting digital registries of farmers receiving fertiliser subsidies and maps of the fields they worked on.

Pula built a dedicated data service unit that now generates seven-figure revenue at a 50% gross margin and is growing 300% year-on-year. Within three to four years, it grew to almost the same size as the insurance business. According to co-founder and president Rose Goslinga, both business units are now profitable and mature enough to grow independently, freeing up capital from Pula’s $20 million Series B for acquisitions.

“Once we diversified our revenue streams, we started hitting 95% of our target consistently, quarter on quarter,” Goslinga told TechCabal. “Our investors loved it.”

Pula now targets startups with at least $500,000 in revenue and products in demand by governments, insurers, or agribusinesses. “We’d rather buy one than try to set one up from scratch,” Goslinga said.

Elsewhere, banks, telcos and manufacturers typically buy startups, but in Africa, corporates have largely stayed out of the startup market, leaving founders and their investors with few places to sell. If FSD and S2E’s bet works and more African companies buy startups, then startup investors get their money back sooner, redeploy it into new funds, and the whole cycle of startup investing speeds up.

“We are not financially involved in the actual acquisition between Pula and any of the targets,” said Simmons. “We’re merely a fly on the wall.”

The agency is mostly interested in what the exercise teaches. “Tech is supposed to be bought by corporates, and that’s how people get exits,” he said. “We were not seeing that in the ecosystem.”

Like most investors, Simmons is concerned about what happens when corporate exits do not occur. “Exits are so constrained in our ecosystem that it threatens the entire private equity and VC landscape because if you can’t exit, you can’t then redeploy into other funds, and LPs don’t come back.”

Record year, missing corporate layer

While corporate venture capital and M&A thrive globally—with CVC-backed startups drawing $65.9 billion across 3,434 deals in 2024—African corporates have largely remained on the sidelines despite sitting on substantial cash reserves, such as South African non-financial companies holding R1.8 trillion ($96 billion) in bank deposits as of July 2025.

Deal counts are climbing anyway. TechCabal Insights recorded 67 mergers and acquisitions across the continent in 2025, a 72% jump from 2024. The first half of 2026 produced 63 deals, nearly doubling the 33 tracked in H1 2025.

However, studies like those by Stears and Ventures Platform highlight that exit routes remain narrow, characterised as “endogenous liquidity”, where the ecosystem recycles itself through transactions like Flutterwave acquiring Mono, Chowdeck acquiring Mira, and Moniepoint acquiring Orda and Grocel.

Pulkit Srivastava notes that the gap is largely about translation: large companies excel at scaling from 10 to 100 but struggle with the zero-to-10 phase. “Corporates don’t talk the startup language, and the startups don’t talk the corporate language,” he explained.

Ultimately, until local corporates step into the M&A market, the ecosystem’s liquidity options will remain constrained, leaving investors and founders waiting for broader institutional participation.

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