Africa’s startup ecosystem raises $843m in five months

…Loses steam despite rise in deal activity

Africa’s startup ecosystem attracted $843 million in funding during the first five months of 2026, but the sector is showing signs of slowing momentum despite a recent increase in deal activity.

According to the latest report by Africa: The Big Deal, startups across the continent secured the funding through 160 deals valued at $100,000 or more between January and May. While the figures point to continued investor interest in African innovation, they also highlight a market that is operating at a much slower pace than it did a year ago.

The report shows that 37 startups raised a combined $135 million in May, up from 32 deals worth $110 million in April. The increase suggests that deal activity is gradually recovering after hitting a low of 22 deals in March.

However, the rise in transactions has not translated into stronger funding volumes. May’s $135 million funding total remained significantly below the previous 12-month monthly average of $255 million and far behind the levels recorded throughout much of 2025, when Africa’s startup ecosystem averaged about 50 deals and roughly $300 million in funding each month.

The figures suggest that while investors are still backing promising ventures, they are deploying capital more cautiously and concentrating larger investments in fewer companies.

Read also: Africa startup investors shrink to five-year low in 2026

Data from the report reveals that four transactions accounted for nearly three-quarters of all funding announced in May. These included Nala’s $50 million credit facility, LemFi’s $30 million Series B extension, Africa GreenCo’s $10 million raise and Bfree’s $10 million funding round. Together, the four deals contributed $100 million out of the month’s total $135 million.

This concentration of capital underscores a growing divide within the ecosystem, where well-established startups continue to attract significant funding while smaller and early-stage ventures face a tougher fundraising environment.

Another notable trend is the changing nature of startup financing across Africa. Debt financing is now playing a much larger role than in previous years. In May alone, startups secured $68 million through debt and $65 million through equity investments, with grants accounting for just $2 million.

The shift reflects a broader transformation in Africa’s venture capital landscape. About 12 to 18 months ago, equity investments represented more than 70 percent of startup funding. Today, debt and equity contribute almost equally to the market, indicating that startups are increasingly relying on alternative financing options as venture capital firms become more selective.

According to Max Cuvellier Giacomelli of Africa: The Big Deal, the trend is evident across the year-to-date figures, with the $843 million raised between January and May almost evenly split between debt and equity financing.

The report notes that debt has become a stabilising force for the ecosystem, helping maintain funding levels even as equity investments remain under pressure.

Geographically, West Africa and East Africa dominated fundraising activity in May, attracting about 85 percent of the total capital raised. Nigeria emerged as the continent’s standout market, accounting for approximately 64 percent of all equity funding secured during the month.

Fintech continued to lead all sectors in terms of capital attracted, driven largely by the sizeable funding rounds secured by Nala and LemFi. The sector remains a favourite among investors because of its ability to scale quickly and address longstanding financial inclusion challenges across the continent.

Read also: Cascador injects $5m into Nigerian startups driving impact

Despite the slower fundraising environment, there were encouraging signs of maturity within Africa’s startup ecosystem. Six exits were recorded in May, including the acquisition of Ghana-founded insurtech pioneer Bima in a deal valued at $119 million. The transaction demonstrates that investors and founders are still creating value and generating liquidity even during a period of subdued fundraising.

The latest figures point to what analysts describe as a new reality for African startups. Deal activity is recovering from earlier lows, but funding levels remain below historical averages. Investors are becoming more disciplined, debt is taking on a greater role, and larger funding rounds are increasingly concentrated among a handful of proven businesses.

For Africa’s technology sector, the challenge now is not just attracting more deals, but restoring the scale of capital flows needed to fuel the next phase of startup growth. While major fundraising announcements such as Spiro’s recent $215 million raise may provide a boost, the broader ecosystem continues to operate in a more cautious investment environment than it enjoyed in 2025.