At the start of 2026, Africa’s startup funding market appeared to be on firmer footing. Startups across the continent raised $711 million in the first quarter, up roughly 27% from the same period a year earlier, suggesting the recovery that began in 2025 was gathering pace.

Beneath the headline features, however, the picture was less encouraging. The number of deals worth between $100,000 and $500,000 fell from 140 to 92, a decline of around 30%. The early cheques that help bring startups into existence dropped even more sharply, from 73 to 32. For the first time in recent quarters, debt financing also overtook equity funding.

The data suggests many investors slowed down in their funding of early-stage startups. Launch Africa Ventures did the opposite. The pan-African venture capital firm, whose portfolio now spans more than 180 portfolio companies across 25 countries, says it completed 15 new investments in 2026, focusing on the very early-stage cheque sizes much of the market has retreated from.

Launch Africa’s 2026 cohort spans AI, the future of work, B2B commerce, supply chain, and embedded finance across Francophone, North, West, and Southern Africa. The named investments are Udu Technologies, Fincart, Tayar, Khaime, Anavid, Mainstack, Growwr, Yamify, Legendary Foods, and Masunga.

The firm also made follow-on investments in nine existing portfolio companies: Clarrio, Finverity, Agridex, Periculum, Recital Finance, Octavia Carbon, Itibari, Solarbox, and Awabah.

So far, the strategy appears to be paying off. In June, Launch Africa returned $2.5 million to investors in its first fund after completing 11 exits, placing it among the small group of African managers that have handed cash back to limited partners in this cycle.

The firm’s second fund reflects a shift in strategy. While Fund I pursued a high-volume approach, spreading capital across a large number of startups, Fund II is taking ownership stakes while reserving more capital for follow-on investments into its strongest-performing portfolio startups.

I spoke with Uwem Uwemakpan, the head of investments at Launch Africa, to understand the reasoning behind the firm’s contrarian pace and how the firm plans to get money out again in a thinner market. 

This interview has been edited for length and clarity

Everyone else is pulling back from early-stage right now. You just did the opposite and closed 15 deals. Walk me through the reasoning. What do you see in 2026 that the rest of the market doesn’t?

The reasoning is contrarian by design, not by accident. We ran a sector-mapping exercise to identify where capital was underinvested relative to growth potential and impact on Africa’s trajectory, and where the global technology tailwinds actually apply.

Two things converged in 2026. First, infrastructure: PAPSS is operational, data connectivity investment is accelerating, and regulation is catching up rather than lagging. Second, discipline: Q1 deal count was reportedly down roughly a third this year, and debt overtook equity as a funding source for the first time. Everyone reads that as a reason to wait. We read it as the moment the $100K–$500K cheque, the one that actually creates a company, nearly disappeared. If nobody writes that cheque in 2026, there’s no Series A class in 2029. We’d rather own that pipeline than inherit someone else’s gap in three years.

You mentioned that without first checks in 2026, there is no Series A class in 2029. Your own liquidity depends on there being a well-capitalised growth-stage class in 2030. Are you underwriting Fund II on the assumption that layer recovers, and what happens to your exit timeline if it doesn’t?

We’re not underwriting Fund II on the assumption that the growth-capital layer recovers on our timeline; that’s not a bet we get to make.

Every deal has to pass what we call Exit Realism before we write a cheque. In practice, that means named acquirers across banks, telcos, global platforms, industrials, and DFIs, not exclusively Series A-and-up VCs. We are seeing African exits cluster in the $50–150M trade-sale range, and that pathway doesn’t depend on a well-capitalised Series A market existing on our schedule.

If the Series A layer does recover, and the infrastructure argues it will, because demand for what these companies do isn’t going anywhere, that’s upside, not the base case. If it doesn’t, we still have a path through strategic acquirers and secondaries. We’re hedged against the scenario in your question, not hoping it doesn’t happen.

What makes a company the kind of early bet you describe?

Market and fund timing: why now, specifically, and does the exit timeline fit our remaining fund life? Unit economics: do the numbers actually work? FX resilience: does the model survive currency volatility, not just growth? Scalability: is multi-market architecture built in from day one, not retrofitted later. Exit realism: can we name three to five specific acquirers, not “we’ll figure it out.” And founder quality, which is where a lot of early-stage companies actually fail.

Sector-wise, we try to avoid crowded spaces unless there’s a strong case for a specific company. The saturated end of the market has better brand recognition. The underserved end sometimes has better economics.

In Fund I you did more than 100 investments and passed your follow-on rights to your LPs. In Fund II you’re taking 5% to 15% positions and following on yourselves. Those are two very different funds. Does that change how you evaluate and invest in companies?

The substance of the question is right,  it changes everything about how we evaluate. A fund built for volume is optimised to not miss outliers; the underwriting bar is lower because the portfolio math forgives individual misses. A fund built for concentration can’t afford that. Every company has to individually justify a 5-10% position, which means we’re doing Series A-grade diligence at seed: separate co-founder interviews, reference checks, unit economics that have to make sense before we write the cheque, not after. And even more rigorous analysis if the ownership is below our preferred threshold.

It also changes our relationship to the company after we invest. At lower ownership, we are just a name on the cap table. At 5% to10%, we can be a board-level stakeholder in the outcome. Follow-on capital, governance support, and exit origination are core to the job now, not an afterthought.

Do we always get to that ownership target at the first cheque? Not always. That’s what our follow-on framework is for; it lets us double down on the winners as the case develops.

Bigger stakes are easier to sell. But a bigger stake also means fewer buyers who can afford to take it off you. In a market with less growth capital around, does concentration actually make it harder to exit?

That’s the right challenge to raise, and it’s one we underwrite for rather than discover later. We don’t typically expect to exit a full stake in one motion. We target a partial-exit approach that generates liquidity along the way rather than waiting for a single buyer to take the whole position.

Concentration does raise the size of buyer we eventually need for what’s left. It doesn’t mean we only have one way to find them.

The release mentions follow-ons into existing portfolio companies. What are the companies?

Our follow-ons are concentrated, not spread evenly, and we’ve built a framework around it, with both a defensive and an offensive rationale. We’re doubling down on companies hitting at least 80% of their original growth projections with stable or improving unit economics, or demonstrating the ability to capitalise on market tailwinds. Follow-on capital spread evenly across a portfolio is a subsidy. Follow-on capital concentrated in outperformers is a return strategy. 

Our follow-ons this year include Clarrio, Finverity, Agridex, Periculum, Recital Finance, Octavia Carbon, Itibari, Solarbox, and Awabah.

Who buys the companies you’re backing today?

The honest answer to “who buys next” is that we’re not passively waiting for that layer to thicken again, we’re doing three things in parallel. 

First, widening who counts as a buyer: banks, telcos, global platforms, industrials, and DFIs alongside growth-stage VCs, because the growth-VC layer thinning doesn’t mean the acquirer universe is thinning. 

Second, we’ve formalised secondaries as a standing programme rather than an opportunistic one-off, buying and selling stakes directly with other funds and later-stage investors rather than relying only on a next-round-led exit. 

Third, we’re originating exits earlier and more actively, building acquirer relationships well before a company is exit-ready rather than reaching out cold when we need liquidity. If the market thins further, that’s more reason to control origination ourselves, not less.

Debt has overtaken equity as a funding source this year. How many of your own portfolio companies are raising debt now, and do you see that as a healthy shift or a warning sign?

Debt overtaking equity signals a market maturing past pure equity dilution for working-capital needs. I think this is healthy, and it’s what you’d expect once more companies have revenue predictable enough to service debt than they did three years ago. We’ve seen some of our stronger performers choose debt deliberately as they scale and prepare for the next round.

The warning sign is when debt papers over a growth-at-all-costs model that never made the unit economics work. That’s not maturity; that’s extending the runway on a problem instead of fixing it.

You’ve noted that founders are raising at more rational prices. In real numbers – what are you paying to get into a company today versus what the same stage cost you in 2021?

2021 pricing was set by term-sheet competition, where multiple funds chased the same round; valuations moved on FOMO rather than unit economics. What we’re seeing now is pricing set by capital scarcity, not company scarcity, which is a very different dynamic. Founders are now more realistically setting valuations closer to what their actual growth and margins support, because there isn’t a second or third term sheet forcing the number up. That’s better for us as an investor, and honestly better for the founder long-term: a valuation you can grow into is worth more than one you spend two years catching up to.

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