Grace Ashiru
Africa’s startup ecosystem requires a boost of significant “big exits” to expand the pool of investors and available capital, according to a leading official from the World Bank’s private investment branch at a venture capital summit in Lagos.
Shruti Chandrasekhar, head of the Africa private equity division at the International Finance Corporation, stated that if investors begin seeing returns on their high-profile investments, it will create the “watershed moments” essential to drive the industry forward.
The IFC official pointed to the acquisition of Nigerian fintech Paystack by US payments company Stripe five years ago for an estimated $200 million as a significant milestone in the West African market. While there have been a few major exits in South Africa and Kenya in recent years, she emphasized that there haven’t been enough of these events. “There hasn’t been a realization of substantial capital in these markets for it to fully take off,” she noted.
In 2024, African startups raised $2.2 billion through equity, debt, and grants, excluding exits, according to Africa: The Big Deal, a consultancy tracking fundraising. A total of 188 ventures secured $1 million or more, and 22 exits were recorded
Private equity in Africa has faced challenges in providing competitive returns to investors, primarily due to currency devaluations across the continent. However, the technology sector has remained a promising area. While valuations for African startups have soared over the past decade, there have been limited acquisitions or initial public offerings.
Chandrasekhar pointed to India as an example of an emerging market where several “watershed” exits had occurred. “In India, many individuals and firms profited from venture investments, and because they made money, they reinvested, fueling further market growth,” she explained.
Andrew Alli, a seasoned investor and non-executive director at British International Investment, the UK’s development finance institution, noted that “earlier iterations of investments by funds may not have focused much on exits.” He emphasized that investors should have an exit strategy in place almost as soon as they make an investment.
“In the long term, we need to have a discussion on how to strengthen our capital markets to enable more local exits,” stated Alli.
In the past two years, we have seen eight full exits, returning [millions of dollars] in capital to limited partners. Most of these exits were to global strategic players, such as Saudi Telecom,” said Genevieve Sangudi, co-founder of pan-African private equity firm Alterra Capital.
Looking back, the lesson is that not every great company is a good private equity investment,” she said at the conference. “You can have an excellent company, but if there’s no clear path to an exit, it might be better off as a family-owned business. There are spaces in the ecosystem for companies like that.
