Africa will need to deploy at least $120 million annually in pre-seed capital to repair a weakening startup pipeline and secure the long-term health of its innovation ecosystem, according to an analysis by Grégoire de Padirac, chief executive of Digital Africa.
Despite being the first and most critical layer of venture financing, pre-seed funding remains marginal in Africa, accounting for just 1.5 percent of total capital invested in 2025, far below the four percent to six percent typical in more mature markets such as the United States, de Padirac said.
The imbalance, he warned, threatens the flow of viable startups into later Series A and B rounds, even as overall venture funding across the continent rebounds.
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Data from the Africa: The Big Deal database cited in the analysis shows that 281 startups raised $46.5 million in pre-seed funding in 2025, a figure largely unchanged from 2024. This stagnation contrasts sharply with the broader African venture capital market, which expanded by about 40 percent during the same period.
Pre-seed rounds in Africa typically range between $100,000 and $500,000, financing early teams and rudimentary prototypes at the riskiest stage of company formation.
Unlike founders in developed ecosystems, African entrepreneurs often lack access to personal savings or friends-and-family capital, making institutional pre-seed funding particularly critical, de Padirac noted.
Yet the pool of investors willing to write these first cheques is shrinking. The number of active pre-seed investors declined to 135 in 2025, from 155 in 2024 and 200 in 2022, while investment velocity fell to an average of 3.6 deals per investor per year, down from 5.9 three years earlier.
Funding remains heavily concentrated in the continent’s four largest startup markets: Nigeria, Kenya, South Africa and Egypt, which together captured nearly 60 percent of total pre-seed flows in 2025.
Sectorally, fintech and agriculture and food dominate early-stage deal activity, reflecting both financial inclusion priorities and the influence of impact capital, while capital-intensive sectors such as deeptech, housing and waste management remain underfunded.
De Padirac also flagged a deterioration in the structure of pre-seed financing itself. Grants accounted for 42 percent of pre-seed funding by value in 2025, up from 20 percent in 2021, with particularly high reliance in markets such as Kenya and Tanzania. While grants play an important role in research and impact-driven projects, he argued that excessive dependence undermines market discipline and weakens long-term ecosystem sustainability.
The pressure has been compounded by the withdrawal or repositioning of historic private players. Between 2019 and 2025, exits by programmes such as Techstars, Y Combinator and the Google Black Founders Fund, alongside shifts by regional funds, reduced Africa’s private pre-seed investment capacity by more than 60 percent, according to the analysis.
European public actors have stepped in to fill part of the gap, with Germany, the United Kingdom and France launching targeted interventions. France, de Padirac said, has adopted a dual-track approach, with Proparco’s Choose Africa VC focusing on fund investments and larger tickets, while Digital Africa targets market failures at the pre-seed stage through micro-equity investments of €20,000 to €100,000 under its Fuzé initiative.
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In 2025, Digital Africa completed 28 pre-seed investments, accounting for 35 percent of equity deals outside the Big Four by deal count, despite deploying just two percent of total equity tech funding in those regions, evidence, de Padirac argued, of the outsized impact small, well-structured cheques can have.
To restore the startup pipeline, de Padirac estimates that at least three percent of total African venture financing should flow into pre-seed rounds. Based on projections of $4 billion in total startup funding in 2026, this implies the need to deploy roughly $120 million annually, supporting about 800 startups a year.
Achieving this scale will require patient public capital, structured as evergreen or first-loss vehicles, combined with private-sector management discipline and a clear focus on return potential rather than grant dependency, De Padirac averred.
Without such reforms, Africa risks starving its innovation ecosystem at its most fragile stage, leaving later-stage capital competing for too few investment-ready startups.
