With African startups raising $2.16 billion through September, venture investor Wale Salami urged backers to scrutinize founder pay and cash reserves, arguing that funding alone does not show how carefully companies spend.
Africa: The Big Deal put financing for January through September 4% below the $2.24 billion raised a year earlier. Equity funding moved in the opposite direction, rising 23% to $1.5 billion. Those totals track money raised, while Salami’s argument concerns how companies use it.
Salami, who founded and leads the Midlothian Angel Network, set out his case in an Oct. 19 BusinessDay column. He said investors should examine a startup’s monthly spending, how long its remaining cash can support operations and what its founders earn. He called for those checks before an investment and at later board meetings.
Salami argued that improvements in revenue or profitability should drive increases in founder pay, rather than the size of a funding round. He also placed responsibility on investors, saying a focus on valuations and capital raised can weaken oversight of recurring expenses. “A valuation is an opinion, and cash is a fact,” Salami wrote.
His proposal does not require founders to work without pay, Salami said. He argued that compensation should be weighed against the cash a company needs to keep operating. Investors, in his view, share responsibility for examining those choices and the company’s spending.
Salami cited a 2023 post by investor Kola Oyeneyin, who said he had heard of two founders drawing $15,000 and $50,000 a month, respectively, from investor funds before their companies closed. Oyeneyin did not identify the businesses or say what caused either closure.
Salami said the Midlo Research Institute plans to publish a report on the Top 20 African Tech Failures.
