Class of 2016: What surviving a decade actually requires

Ten years ago, one could easily count the African startups that raised venture capital in a single year. In 2016, 77 startups raised $367 million in venture funding, according to Partech. Nigeria, South Africa, and Kenya accounted for 79.4% of that funding. Financial inclusion attracted the largest share of capital at $206.3 million, or 56.2% of total funding, with fintech accounting for 19% of that investment. By today’s standards, these numbers look almost impossibly small. But they captured a technology economy at the beginning of something.

Some of the earliest startups are gone; others have become major African technology companies. Founders have changed their business models, investors have rewritten their playbooks, and regulators have caught up with industries that barely existed when the first cheques were written. Markets once considered too difficult are now crowded, while some assumptions about Africa’s startup boom have proven wrong. The companies that survived offer a better way to understand the past decade than funding numbers alone do.

The most important change may be that the ecosystem became capable of producing its own momentum. In 2016, a founder who wanted to build a technology company in Africa had to secure not only customers but also the infrastructure, talent, capital, and investors needed. “We are now a long way away from 2014, when we begged investors to back companies like Andela,” Iyinoluwa Aboyeji, co-founder of Andela, the global talent marketplace, and fintech unicorn Flutterwave, told TechCrunch in 2023. That transformation began with a relatively small number of bets.

The big bet

Fintech was the defining sector of African technology in 2016, particularly in Nigeria. That was not simply because investors liked financial technology. The opportunity was unusually clear. In 2016, 40.1 million Nigerian adults—41.6% of the adult population—were financially excluded, while just 36.9 million people, or 38.3%, had a bank account, according to data from Enhancing Financial Innovation & Access (EFInA). Mobile phones were already far more widely distributed than formal financial services, creating a large gap between how people were transacting in their daily lives and the institutions available to serve them. The opportunity was to build the digital rails for economic activity that was already happening outside the formal banking system.

Companies such as Paystack, Flutterwave, Interswitch, Safaricom’s M-Pesa, and later Moniepoint and OPay solved different parts of that problem. Some built payment infrastructure; others built consumer wallets, merchant networks, or digital banks. They helped establish a market that investors could understand, and customers could use. Fintech became part of the ecosystem’s infrastructure and remained dominant even as the ecosystem expanded.

But success also had a cost. Capital began to cluster around familiar business models. If payments and financial inclusion were the clearest examples of technology solving large African problems, investors naturally looked for the next payment company, the next digital bank, and the next lending platform.

The result was an ecosystem that became very good at building financial businesses. It was less obvious whether it could build companies in industries where the path to scale was slower, capital requirements higher, and regulatory risks harder to price. That question is still unresolved.

The money changed

The other defining feature of the decade was money. African startups went from raising $367 million in 2016 to attracting billions of dollars a year at the height of the venture boom. Foreign investors started writing larger cheques for African startups, and companies that had spent years proving themselves in one market began expanding into others. Teams grew, valuations climbed and, for a while, the safest way to describe a startup’s progress was simply to say how fast it was growing.

For founders who had spent years arguing that Africa was a huge, underdeveloped technology market, the money felt like proof they were right. Foreign investors were finally taking the market seriously. But there was a catch: abundant capital made it easier to put off questions that would eventually have to be answered. Startups could expand into several countries before figuring out whether the model really worked in one. They could keep prices low to win customers, hire ahead of revenue, and raise another round before the last one had run out. Then fundraising slowed. Startup fundraising in Africa fell by 25% in 2024 to $2.2 billion, according to Africa: The Big Deal, a funding tracker.

Investors began asking questions that had seemed almost unfashionable during the boom: How much does it cost to acquire a customer? When does the company make money? What happens when the next round does not arrive?

For the Class of 2016, this was perhaps the decade’s most important test. These companies had to survive two very different ideas of what a startup should be: speed and endurance.

Survival got harder

As technology businesses became more important, governments began paying closer attention.

In 2016, many startups operated in regulatory grey areas. A company could begin building a financial product before regulators had fully decided which category it belonged to. Today, that is much harder. Fintechs now need licences to operate in many markets. Digital lenders face rules around how they collect and use customer data and how they recover loans. Crypto companies are being pulled into formal regulatory frameworks. That change is evidence that technology businesses have become important enough to regulate.

Consumers have changed, too, although not always in the way the tech ecosystem expected. Africa has more internet users, more smartphones and more digital services than it did in 2016. But most African consumers have not suddenly become affluent. Companies still have to sell into fragmented markets where incomes are low, payments can be difficult to collect, and reaching customers is expensive.

Having millions of potential users does not necessarily mean having millions of people willing or able to pay. In July, GoLemon, the Lagos-based grocery delivery startup founded by former Paystack employees, announced it was shutting down. While the company said individual grocery orders were profitable, it never generated enough volume to cover the fixed costs of running its own supply chain.

If the past decade has taught us anything, it is that the ecosystem’s most important asset is accumulated experience. The next ten years will produce another cohort of survivors. Their stories will tell us whether Africa has finally built an ecosystem capable not merely of producing startups, but of producing durable companies.