Many wonder why African Billionaires are not investing enough into African startups. These wealthy individuals have built fortunes over decades—but they often stick to familiar sectors. In this article, we break down the reasons in simple terms. We also explore how a few inspiring efforts by some of them are beginning to change the landscape.
Table of Contents
Why African Billionaires Are Not Investing Enough in Startups
1. Wealth Built in Traditional Sectors
African Billionaires have made their fortunes in established industries like real estate, natural resources, and telecommunications. For example, Aliko Dangote earned his wealth primarily through cement and sugar. These fields offer steady returns and lower risks compared to the unpredictable world of startups.
While African startups have recently attracted billions in venture capital funding—with reports showing that African startups raised over US$3.3 billion in 2022; according to latest reports from venture capital analysts African startups raised roughly US$2.9 billion in 2023—a modest decline from the US$3.3 billion recorded in 2022. Importantly, local high‑net‑worth individuals contribute only about 5–7% of the total venture capital invested on the continent, while most of that money came from international investors
These figures highlight that despite a growing pool of entrepreneurial talent, the bulk of early-stage capital still comes from outside Africa.
2. Startup Risks and Uncertainty
Investing in startups is inherently risky. New companies can fail quickly, and even promising ventures often take years to become profitable. In Q1 2023, nearly 55% of funding rounds in Africa were at the seed or pre-seed level, meaning startups are still testing and refining their ideas.
For many African Billionaires, the potential for losing capital is too high. They favor investments that offer steady, predictable returns, and the uncertainty of startups discourages them from venturing into this space.
3. Weak Ecosystem and Regulatory Challenges
The African startup environment faces many hurdles. Complex regulations, political instability, and limited access to formal financing make the ecosystem challenging. For example, reports have shown a significant decline in local venture capital activity in recent years, reflecting broader investor caution.
Without a robust support system—including clear regulations and active networks—innovative ideas often struggle to gain traction. In such an environment, many wealthy local investors stick with safer, more familiar investments.
4. Missed Opportunities for Growth
Startups are engines of innovation, job creation, and economic growth. Successful ventures like Nigeria-based fintech company Moniepoint—now a unicorn—demonstrate the immense potential for transformation. When startups succeed, they open new markets and drive economic development.
Yet, the low participation of African Billionaires means local entrepreneurs miss out on not only much-needed capital but also valuable mentorship and networks. This lack of local support slows the growth of a vibrant startup ecosystem that could create long-term wealth and jobs for the continent.
5. Inspiring Efforts by African Billionaires
Even though many local investors remain cautious, there are inspiring examples of African billionaires leading the way in supporting startups. The Tony Elumelu Foundation stands out as the most notable among these efforts.
Tony Elumelu Foundation
Founded in 2010 by Nigerian billionaire Tony O. Elumelu, the Tony Elumelu Foundation is one of the foundation owned by a Billionaire in Africa that is empowering African entrepreneurs. Under its flagship Entrepreneurship Programme—backed by a US$100 million commitment—the Foundation has:
- Trained over 1.5 million entrepreneurs on its digital platform, TEFConnect.
- Disbursed nearly US$100 million in non‐returnable seed capital.
- Empowered over 21,000 young African entrepreneurs across all 54 African countries.
- Helped create more than 400,000 direct and indirect jobs on the continent.
This comprehensive approach not only provides vital funding but also offers mentorship, capacity-building, and a platform for networking—all of which are essential to building a sustainable startup ecosystem. By focusing on Africapitalism, Tony O. Elumelu’s initiative shows that investing in innovative ventures can drive both economic growth and social development.
Direct Billionaire Investments
In addition to the Tony Elumelu Foundation, some African billionaires are beginning to invest directly in startups. For instance, Egyptian billionaire Mohamed Mansour recently backed P1 Ventures, a VC firm that closed a US$50 million fund aimed at boosting tech investments across key African markets. Similarly, Nigerian billionaire Tope Awotona’s success story with Calendly inspires many young entrepreneurs—even if his primary business is based abroad, his journey underscores the potential of African talent when given the right support.
6. How to Change the Trend
To unlock Africa’s innovation potential, local investors must reconsider their investment strategies. Here are some key steps:
- Education and Exposure: Wealthy investors need to learn more about the startup ecosystem. Workshops, networking events, and success stories like those from the Tony Elumelu Foundation can help change perceptions about startup risk.
- Government Support: Policy reforms such as tax incentives, streamlined regulations, and the creation of innovation hubs can make startup investments more attractive.
- Strategic Partnerships: Collaborations between local investors and international funds can reduce risk and provide the mentorship necessary for startups to scale.
- Mentorship: Beyond capital, experienced investors can guide entrepreneurs through challenges, improving the likelihood of success.
By embracing these strategies, African Billionaires can play a more active role in nurturing the next generation of innovators.
7. The Bigger Picture
Africa’s startup ecosystem is growing despite the challenges. Innovative companies—especially in fintech—continue to attract significant international investment. However, local funding remains disproportionately low. When local investors step in, they bring not only money but also a deep understanding of the market and mentorship that is tailored to the continent’s unique challenges.
Efforts like the Tony Elumelu Foundation demonstrate that with the right support, entrepreneurs can achieve remarkable success. Such initiatives inspire change and can help bridge the gap between traditional, low-risk investments and the dynamic world of startups.
8. Final Thoughts on Why African Billionaires Are Not Investing Enough in Startups
In simple terms, African Billionaires have traditionally invested in familiar, low-risk sectors. The inherent risks of startups, combined with regulatory and ecosystem challenges, discourage local investments. Yet, startups offer enormous potential to drive innovation, create jobs, and transform economies.
Changing this trend will require a shift in mindset—from a focus on predictable returns to an appreciation for long-term, transformational growth. The inspiring example of the Tony Elumelu Foundation shows that when African billionaires invest in startups, the benefits can be enormous: millions of entrepreneurs trained, significant capital disbursed, and hundreds of thousands of jobs created.
It is time for more local investors to take a chance on innovation. By stepping out of their comfort zones and embracing the risk of early-stage investments, African Billionaires can help build a more dynamic, resilient, and prosperous future for Africa.