We have an interesting situation in African VC. On one side, dozens of (2021-’23 seed vintage) companies are stuck in pre-series limbo. On the other hand, almost all series-stage businesses are hacking their way through an unforgiving peri-series market jungle.
The result is a lot of stuck companies that might be doing just well enough to sustain commercial and impact goals. But it is essentially dead liquidity for investors. It’s also amplified the risk of losing not just potential returns, but also potentially brilliant ventures to long stretches of elliptical silence.
Every month, dozens of earlier-stage investments are joining the queue. It’s an old problem that doesn’t yield to hand-waving, platitudes or LinkedIning.
The bigger challenge indeed remains creating exits that relieve capital returns pressure because full dams are a disaster in waiting. But this does not negate the need to unclog the wheels. Clogged pipes cannot carry any water, and the seed-to-series market is full of what few people are buying, despite the increase in local growth-stage funds.
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In classical physics, a two-body problem is a mathematical representation of how two objects move under the influence of their mutual gravitational attraction. As both objects alter their respective motion due to the gravitational pull, they create an orbit of stretched circles, a.k.a. an ellipse.
Take the sun and our planet, for example. Both exert a gravitational influence on each other, but because the sun is much heavier than the earth, its gravitational pull forces our planet to complete an orbit of the sun, giving us years.
Like planetary systems, founders and investors are the two bodies— each exerting influence, and adjusting course based on the other’s expectations, needs, and capital constraints. But unlike the relative predictability of planetary physics, the gravity here is uneven and constantly shifting. In boom times, arbitrary points become “signals” touted on social media and tech conferences and taught in accelerator programs, etc. So every seed founder goes off chasing the signals they think will attract Series A funding; investors will (often), on their part, entrench the arbitrary benchmark by adding it to an analyst’s checklist.
Unlike planetary ellipses, this orbital relationship changes shape ever so often. From predictable circles to distorted ellipses.
Circular hype-fueled patterns are only valid so long as the boom time lasts. When the winds begin to shift, the two-body analogy begins to break. Partly because factors that are external to capital and/or the product begin to coalesce enough to exert influence field that forces all (sensible) parties to adjust their sails to global headwinds and local realities.
The result is a drawn-out elliptical path with long stretches of silence and slow movement, interrupted by sudden bursts of investor interest or founder desperation.
I should pause here and caveat this entire essay by noting that the seed-to-series gap is not an African problem. For us, part of the problem is that the capital available locally is still too small, and foreign money is paying less attention to Africa. Part of it is also that we’re still recovering from indigestion caused by the last hype cycle.
The other part of it is what this essay is about. That is, the structural and structuring tracks we’re missing for building a post-seed railway.
Here’s my developing perspective on gap manifesting. Plus a few non-exhaustive suggestions to help adjust the system.
The structural gap
The seed-to-Series A gap is not a total mystery. At least part of it is a structural result of how early-stage ecosystems across Africa have evolved, or more accurately, sprawled.
At least these layers of the structure contribute to why this gap exists.
- •A lack of clarity around what pre-seed and seed capital are actually for, and what founders should expect from each.
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- •An unstructured mess of early capital sources — from grants to pitch competitions to VCs and “angel syndicates” — that creates noise, not signal.
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- •A surplus of MVP-to-pre-seed builders (accelerators, incubators, studios) that push “traction” without building structural readiness for venture capital.
Let’s unpack that.
First, expectations at the earliest stages are all over the place. Some founders raise pre-seed rounds thinking they’ve cleared the runway for Series A. A few might raise seed money with zero idea of what milestones they’re actually aiming for. Or worse, overestimate what milestones are even possible! And in yet another case, the differences between a $100,000 friends-and-family cheque, a $500,000 SAFE and a $800,000 priced round are often ignored until it becomes a problem.
Second, the early-stage capital landscape is often crowded and contradictory. Grants, angels, development funds, and early VCs often back very different things, and a lot of the time, they don’t speak to each other, not in a literal sense. But in a systemic alignment sense.
Thus, a startup that “raised” $400k may have patched that together from five unrelated sources, each with its own goal and expectation. And while that may be enough to help startup X not die, it is also enough to keep it almost permanently frozen out of future growth capabilities, barring correction.
While I understand that survival is a valid rule of the game, especially at earlier stages and especially in Africa, the type of money that makes up your capital stack is still important. That said, it can blur the line between what’s venture-backable and what’s simply a good business idea with some early traction.
I’ve had the privilege of conducting some venture sourcing, and whether it’s familiarising myself with investors’ checklists or reviewing founders’ projections, the most challenging thing to ascertain is not traction, but how much room there is left to grow.
Here’s a crude example. A hypothetical $10 million fund invests $100k in startup X based on its $10k monthly revenue at a 10x revenue multiple valuation. We can borrow an extremely simplified variation of the (lazy?) revenue multiple valuation model to show that, assuming ownership remains the same, the startup would need to grow its revenue by 10,000 per cent to return the fund. And by 30,000%, to deliver three times the $10 million fund, over a 5 to 10-year timeline.
🚀 VC Return Model (Fixed Revenue, 8.33% Ownership, No Dilution) 📌 Assumptions - Startup MRR: $10,000 → ARR:$120,000 - Revenue multiple: 10× → Valuation: $1.2M - VC investment: $100,000 → Ownership: 8.33% (constant) - VC fund size: $10M 🎯 Growth Needed to Return the Fund | Metric | Value | |-----------------------------|--------------| | Target VC Return | $10M | | Exit Valuation | $120M | | ARR Required | $12M | | Revenue Growth Multiple | 100× | | CAGR (7.8 yrs) | 79.6%. | | CAGR (9.6 yrs) | 61.8% | 🥇 Growth Needed to 3× the Fund | Metric | Value | |-----------------------------|--------------| | Target VC Return | $30M | | Exit Valuation | $360M | | ARR Required | $36M | | Revenue Growth Multiple | 300× | | CAGR (7.8 yrs) | 103.2%. | | CAGR (9.6 yrs) | 72.1% |
All of this just to say that while a $10k monthly recurring revenue might be a valid traction signal to your investment committee, it is by itself not a sign of how high the ceiling is. And you don’t want to be buying near the ceiling. Putting in a bit of money when traction was $1 of monthly revenue would look nicer because getting to $10k revenue traction would also have been a 10,000% revenue growth. But even that would not return your fund. Again, this is not news for VCs—I assume.
Third, and perhaps most importantly, venture-building and venture readiness (not just investor readiness) are two different things. Accelerators, studios, and incubators can help polish an MVP into a market-ready product and serve as a “liftoff” signal for early capital to back a business. But venture isn’t about liftoff — it’s about what happens after.
Note that space ships are noticeably slow at liftoff. However, they then rapidly accelerate and, most importantly, maintain their structural integrity as they progress to progressively thinner atmospheres and beyond. Anyone with sufficient capital to waste can buy or subsidise growth. The challenge is maintaining structural integrity during takeoff and then accelerating more rapidly as you reach the heights at which the product is designed to function as a normal market player. That is, where the product gains disruptive momentum and can create and/or capture enough value to justify its growth demands and how it is reshaping the market.
It bears repeating. Acceleration isn’t the same as growth at all costs. Spacecraft don’t leap off launchpads — they build thrust. Slowly at first, then with compounding force. But only if the structure holds. When gravity gives way to orbit, a Series A market will then no longer serve as Hopium but function as the logical next step. And it doesn’t have to be an arbitrary $5 million and above benchmark, too, because it will be calibrated for each startup’s trajectory.
The structuring gap
While the capital gap is widely acknowledged, there’s less conversation about the structuring gap — the absence of instruments, playbooks, and intermediaries that could bridge that dangerous middle zone between seed and Series A.
What defines this gap?
- •A lack of clean, founder-friendly secondary solutions to correct overvalued early rounds.
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- •Limited use of flexible, milestone-linked investment structures that offer Series A investors de-risked entry points.
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- •Few structured pre-Series A vehicles with enough governance and reporting rigour to build investor confidence without getting in the way.
A bit more on each point above.
First, we all know that secondary deals are uncommon and often messy. When startups over-raise or overprice at seed, there’s limited room to reset. Founders want to avoid down rounds. New investors hesitate to step into tangled cap tables. And while there are ways to course-correct using secondary tools, for example, they aren’t yet common practice in many African markets—not because they don’t work, but partly because few players are actively building them into standard deal flow, especially in a founder-friendly way.
Second, flexible investment structures exist, but they are still the most common unicorns in local dealmaking. Milestone-based SAFEs, revenue-share hybrids, and other fit-for-purpose tools provide Series A investors with optionality and founders with a clear path forward. But they’re often left out. Not because they’re unworkable, but because legal and deal teams tend to revert to what’s familiar (I call this Checklist Analysis) rather than what the situation calls for.
Third, not many funds actively prepare companies for Series A. For those who do, this is a natural point of differentiation. To be clear, this isn’t something every seed fund can or should take on. Fund size, team capacity, and mandate all matter. But where it’s possible, helping startups establish lightweight governance, internal reporting discipline, and strategic pacing can be a real differentiator.
Caveat: This isn’t a call to add another line in the checklist analysis that burdens startups with compliance theatre and/or board control. Even leveraged buyouts know enough to do reporting for the sake of reporting. It simply means staying as close to the venture to help maintain structural integrity without compromising execution and interfering in decision-making.
None of this is new. Everyone doing anything worthwhile in this space should know this.
But it hasn’t always been done consistently, especially during the hype years, when inflated expectations and frothy optimism clouded everyone’s lens. That’s part of (though not the only reason) why companies stall in the post-seed vacuum. They’ve raised just enough to stay alive. But not enough (or not in the right way) to level up. So they linger in the elliptical void, chasing an elusive Series A, too mature for another seed, and unable to justify their last cap table.
That said, few startups might (and some have) make it to the Series-class. Not in today’s market, though, but never say never. But if you somehow manage to carry this baggage along, you’ll have to drop it at some point and risk creating an embarrassing splash then.
Grounding optimism doesn’t have to be Morse
One other thing is evident to me at least. A lot of the friction in this market isn’t just about capital or even structuring. It’s about signal (or the lack thereof) and the absence of shared frameworks to interpret it.
Investors don’t fund what they can’t confidently value (pricing it is a different matter). Founders can’t handle financing conversations confidently when they don’t know how they’re being read. This mismatch creates momentum-sucking drag for both sides.
After chatting with a few people (thanks, Imade, Peter and everyone else), I decided to make something I hope can help reduce that drag.
Aperçu Research is a focused, limited-scope research product designed to serve institutional investors and family offices that want deeper visibility into private African companies between seed and post-Series stages.
The model is simple: think equity research, but for private markets. Sell-side style reports that I will have to carefully keep in line with SEC rules. It’ll include, where possible, company and sector models built around valuation frameworks that I’m learning, as well as some benchmarking across markets, within sectors and geographical ecosystems. The goal is to help crystallise clear theses about upside that are grounded in market realities and performance.
Aperçu Research reports will not be a mass-market read. I will be rolling it out to just 30 investment houses and family offices on an annual subscription basis. In part because I hope to work closely with the people to gain tangible insight by reading it beyond sending monthly reports. If I’m wrong, I want to learn fast. If I’m right, I want to build carefully.
If you want to explore what this might mean for your team’s research capacity, email me at [email protected].
This won’t solve the structuring gap by itself. But, I do think that better signals, that is, tailored, transparent, and grounded information, can help us collectively start to close the distance.