From grants to equity, venture debt to revenue-based financing, the capital stack available to early-stage African founders is becoming increasingly diverse. But understanding what’s accessible, when it’s appropriate, and how to navigate the funding terrain pragmatically is just as critical as raising the capital itself.

The Mirage of “One-Size-Fits-All” Capital

In the recent past, many African entrepreneurs idealised venture capital (VC) as the default path to scale. But a more mature understanding of capital markets is emerging. As the African startup ecosystem matures, founders—and funders—have become more discerning.

Equity capital, especially from early-stage VCs, still plays a pivotal role, but it’s seldom the right fit for young African founders operating ventures within the African market context. The traditional VC model inherently seeks “10x returns, often within 5–7 years, and require rapid growth and scalability. For many businesses, particularly those operating in infrastructure-light, low-margin or informal sectors, this model can be mismatched.

That’s why pragmatism is crucial. Young entrepreneurs must align their funding strategy with their business model, growth trajectory, and risk appetite and market realities. Market realities that demand entrepreneurs stay feet on the ground with fundamentals of unit economics soundly in place.

Sales Revenue: The Original Non-Dilutive Capital

Before pursuing investors, the best capital often comes from customers. There’s a growing appreciation for bootstrapping and focusing on early revenue traction —not just as a funding source, but as a signal to future investors. In our approach with Young Entrepreneur Fund, we emphasise financial discipline and revenue validation early on. It’s not just about survival—early revenue creates leverage in investor negotiations, improves valuation and often reduces the need for excessive dilution.

Grants: Necessary, Strategic, but not Sustainable

Grants continue to play a foundational role in catalysing early-stage ventures in Africa, particularly for STEM-based ventures that typically have a longer runway to product commercialisation, as well as social impact sectors such as health, education, agriculture. Anzisha fellows and ALA alumni working on mission-driven ventures have secured considerable amounts of grant-funding over the years, grants offer non-dilutive capital that can de-risk innovation and support early experiments.

What we have seen is that smart founders treat grants as a bridge to sustainability – Not a long-term strategy. This wilful sustained dependence on grant funding is a phenomenon prevalent across emerging markets referred to as ‘Grantrepeneurs’.

Revenue-Linked Instruments: Bridging the Gap

This is where instruments like revenue-based financing or revenue-linked debt come in—offering a flexible alternative that aligns investor returns with the entrepreneur’s revenue growth. Young Entrepreneur Fund was established in partnership with Imaginable Futures as a revenue-linked debt instrument, backing ALA alumni through a unique model of revenue-linked debt. Instead of taking equity, we recoup our capital through a small percentage of future revenues, capped at a pre-agreed multiple. YEF thereby taking a catalytic role, with the return goal being Fund preservation.

This model gives entrepreneurs breathing room. Unlike traditional debt, there are no fixed repayment schedules or interest penalties. And unlike equity, there’s no dilution or pressure to exit. It aligns incentives: when the venture grows, everyone wins.

This model is particularly well-suited for the African context—where cash flow volatility is high, exits are scarce, and founders increasingly want to retain control. For young entrepreneurs still defining their long-term trajectory (and getting to know themselves as individuals), revenue-linked capital offers the best of both worlds.

Venture Debt: Still Emerging, But Promising

Venture debt remains underutilised across Africa, but it’s beginning to gain traction. Unlike traditional bank loans, venture debt is designed for startups with high growth potential but limited hard assets to put up as collateral. It typically includes a ‘warrant’ or ‘equity kicker’, providing lenders with upside potential in exchange for the higher risk.

For post-revenue startups that are scaling and need working capital or runway extension without further dilution, venture debt can be fantastic option. However, access remains limited due to risk perception and lack of structured products. This is an area ripe for innovation—and we’re seeing more Africa-focussed funds starting to test this space.

Angel Investing and the Role of ABAN

The African Business Angel Network (ABAN) has been instrumental in building the continent’s angel investing ecosystem. Through capacity-building, syndication platforms, and policy advocacy, ABAN is helping to mobilise local and diaspora capital to back African founders. For young entrepreneurs, angel networks are often the first external check—and can be game-changing.

The Mood: Optimistic, But Grounded

Despite macroeconomic headwinds, currency instability, and uneven policy environments, the mood around entrepreneurship in Africa remains resilient. Young founders are increasingly sophisticated in their operational capacity, more networked, and impact-oriented than ever before. In large part thanks to programs like Anzisha, in partnership with Mastercard Foundation, that deliver robust entrepreneurial development programs to talented young entrepreneurs.

Anzisha Venture Partners encourage Founders to assess their businesses by asking questions like:

• “Is this business venture-scalable or cash-flow sustainable?”
• “Do I need equity capital, debt capital, or can I fund growth through revenue?”
• “Given the financing options, what does success look like for me? Which funding option will help me achieve that?”

This grounded approach is not just healthy—it’s necessary. Africa doesn’t need more unicorns for headlines; it needs resilient, impactful ventures that create jobs, build systems, and drive inclusive growth.

Final thought: Viewing Funding as a Product

The future of African entrepreneurship depends not just on more capital—but on better capital design – Seeking a Product-Market-Fit, if you will. If funding is a product (which it largely is) I believe in aligning funding with market needs as far as a product is aligned with customer needs. This required assessing and understanding business realities in context, and positioning for long-term sustainability.

As the funding ecosystem diversifies, young African entrepreneurs have more tools than ever before. But with more options comes the need for more discernment. The right capital at the right time, under the right terms (can’t stress this bit enough!), can change everything.