A Stake in the Soil: Why “Capital-With-Context” Must Play A Bigger Role in Africa’s Startup Evolution

This article is featured on Page 65 of the African Banker Magazine - 3rd Quarter Issue, 2025.

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In 2017, I gave a TEDx talk entitled “Who Will Own Our Future Unicorns?” At the time, no billion-dollar startups existed on the continent except Jumia, which became a unicorn in 2016. Yet, I was convinced they would emerge. And they did in 2019, with Fawry and Interswitch! Since then, we’ve witnessed more African startups achieve billion-dollar valuations, attract international funding, and even exit to major global players.

This represents a significant growth marker for the continent's startup ecosystem, with many of these businesses solving critical pain points and becoming an essential part of our daily lives, particularly within the payment sector. However, my original question in 2017 still lingers: Who truly owns the upside of Africa’s innovation economy? More specifically, who carries the responsibility for sustaining it?

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Strengthening the Foundation: Complementary Roles for Global and Local Capital

African startups continue to attract meaningful global interest. In 2024 alone, they secured $3.2 billion, a testament to the talent and ambition thriving on the continent. Most of this funding came from foreign investors, including development finance institutions and international venture firms. These partners have played an essential role in catalysing Africa’s innovation ecosystem, a role that continues to be required and one that is deeply valued. Their contributions, including capital, institutionalization, risk appetite, and proven playbooks, have helped lay a strong foundation for growth.

As the ecosystem matures, we’re beginning to see the emergence of a new dynamic: the rise of “Capital-with-Context”. For the first time, in the first quarter of 2025, local investors participated in more deals than foreign investors. This is a meaningful signal, not a shift away from what has worked, but an expansion. It’s a sign that the base of support for innovation is broadening and that more local stakeholders are joining the journey, feeling empowered by their role, the responsibility it carries, and the allure of significant upside. 

What’s needed now is deeper participation.  I use “capital-with-context” to describe local capital, which has context and lived experience in the markets where the businesses it invests in operate. This capital can come from angel investors or institutions alike. Local capital does not replace global capital, but it adds a layer of unique and valuable understanding. These capital sources have experienced the hectic Cairo traffic and understand the WhatsApp group traditions of the diverse niche communities in Lekki, Lagos state.  Investors with a local context can move beyond contractual transactions to deeply embedded relationships. They help navigate informal- “permission-based” systems, understand regulatory nuance, and offer trust built on proximity and shared experience.

There’s a growing appreciation that this kind of capital, alongside global capital, can strengthen startups in practical ways; by supporting alignment with local needs, ensuring relevance in complex environments, and fostering long-term sustainability.

None of this diminishes the role foreign capital has played or continues to play. The goal is to build partnerships that are even more balanced, resilient, and inclusive. As seen in markets like Silicon Valley, Shenzhen, and Bengaluru, a strong local capital base often grows alongside international support. The result isn’t less global; it’s more rooted and, ultimately, more sustainable.

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A Turning Point and the Path Forward

A turning point may have emerged. In Q1 of 2025, local investors outpaced foreign ones in startup participation for the first time. This is a meaningful signal, proof that the tide can indeed turn. But it’s still a fragile moment. Without deliberate action, we risk losing the momentum. Thankfully, in recent times, many early investors in African startups have experienced liquidity events through strategic exits or secondary sales, with multiples of up to 50 times invested capital. The reality is that as a local investor, your proximity to the challenges in our markets is an advantage when paired with capital. An advantage that can help increase the odds of success for a startup you invest in.

To build lasting momentum, the “Africa Playbook” must employ local investors who have either built local businesses from 0 to 1 and beyond with battle scars and lessons to share with founders, or who are deeply connected via their experiences in large local enterprises on the continent. Combined with foreign investors who bring deep pockets, growth capital, global playbooks, experience from other markets and international networks to back Africa-based founders who increasingly want to expand from Africa to the rest of the world as global champions. Just like Lemfi,  Moove and a growing number of scaled African startups that started locally, backed by local capital, but have leveraged global investor networks to expand globally. 

In the United States, endowment and pension funds became a cornerstone of startup capital, bringing long-term vision and scale. In China, state-backed funds and tech conglomerates led the way. In India, it was a mix of regulatory reform, family office participation, and government co-investment. Each market found its distinct path. Ours will look different, but no less deliberate.

So, what might Africa’s roadmap include?

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Unlocking Institutional and Angel Capital

Our pension and insurance funds represent over $20 billion in untapped capital. These pools are patient, domestic, and well-suited to ventures’ long-term horizons. While startups are high-risk ventures, the potential outsized return can offer an attractive barbell strategy advantage that helps boost the overall return profile for what are meant to be low-risk portfolios. The Nigeria Sovereign Investment Authority (NSIA) and others, such as the Micro, Small and Medium Enterprises Development Agency (MSMEDA) in Egypt, are blazing the trail, but much more is needed. While reforms are underway, they remain incomplete. The Nigerian Startup Act, for instance, includes tax incentives to spur local investment; however, these incentives have yet to be implemented. We’ve seen what similar policies have achieved in places like the UK, where programs like the Enterprise Investment Scheme (EIS) dramatically increased angel activity by de-risking early-stage bets. If we activate similar mechanisms, we’ll lower the barrier for local capital to engage, especially at the critical seed and Series A stages, where local context matters most.

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Re-evaluating Scale

We also need to revisit our idea of scale and terminal exit valuations. Not every company needs to become a unicorn. In fact, a healthy ecosystem should accommodate a range of outcomes: capital-efficient businesses that exit at $50 million or $100 million, startups that list on local exchanges, and companies that generate steady dividends or adopt revenue-sharing models.

Our capital markets may not yet support massive IPOs, but they can and should create liquidity at more accessible levels. It's essential to begin building companies designed to succeed within our current infrastructure, even as we work to deepen it. After all, liquidity is critical to driving sustained investor participation, whether local or foreign.

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Expanding the Base of Local Investors

One of the most important shifts we can make is cultural: encouraging more local participation at the angel level. After Paystack’s exit in 2020, for instance, I was flooded with calls from people wanting to invest in startups, many of whom had never considered venture capital. But by 2024, much of that interest had faded amid FX shocks and economic uncertainty.

This cycle of excitement followed by retreat is understandable. Currency devaluation and macro swings are significant challenges. But for those of us investing in emerging markets, these challenges aren’t bugs; they are a feature. Venture invests across vintages, rather than cherry-picking years of comfort. If we want to benefit from the upside, we must be dogged and stay present through the cycles - this holds for all investing.

This is why I am excited about the work that groups like the Lagos Angel Network, Africa Angel Academy, and African Business Angel Network are doing to educate and expand the pool of active angel investors. On the institutional side, at Ventures Platform, we’re committed to supporting a broad and resilient base of capital allocators that evolve and invest through cycles. Through efforts like the Africa Prosperity Summit, we bring together a cross-section of public, private, local, and global investors to envision and co-create a more resilient and vibrant ecosystem. 

Capital-with-Context, or local capital, doesn’t compete with global capital; it complements it. It adds context, local insight, and a long-term view shaped by lived experience. It grounds ambition in reality, helping innovation take root not just in pitch decks but in communities. Without it, we risk building an ecosystem that is at the mercy of external shocks with very little inherent resilience  - a shame, really, since Africa’s startups are no longer a promise. They are now mainstream and in some cases systemic - deeply intertwined with our lives, from making payments to accessing healthcare. As a result, we now have unicorns in almost every region of the continent. 

What remains is a resounding answer to the question I asked on that Ted talk stage in 2017 - that goes like this: “We will own a part of our future unicorns.”

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About Kola Aina

Kola is an experienced investor, insightful non-executive director, and company chair who is passionate about supporting the growth of startups. He is the Founding Partner at Ventures Platform Fund.

He has a proven track record of success with investments in over 100 companies across Africa, India, and the US. This includes payment companies like Paystack and healthcare companies like MDaaS. Kola was also the founder and former CEO of Emerging Platforms, a leading enterprise software provider in West Africa. He has established extensive networks in the private sector, development partners, financiers, governments, and regulators.

With vast experience in Africa's most significant economic market, Kola is an entrepreneur, technology operator, and venture capital investor. He brings expertise across various sectors, including venture capital, technology, media, agriculture, infrastructure, publishing, and real estate. Additionally, he has a strong interest in the arts.