Startups—in particular young, tech-enabled companies designed to scale rapidly—are a potential engine of economic transformation in Africa. Yet in 2022, Africa’s peak year for venture-capital activity, the continent attracted only 1 percent of global VC deal value, despite generating about 3 percent of the world’s GDP. What is holding back the continent’s startup ecosystem, and what could help it grow?
To answer these questions, Chicago Booth’s Emanuele Colonnelli, the World Bank’s Marcio Cruz and Mariana Pereira-López, Columbia’s Tommaso Porzio, and Stanford PhD student Chun Zhao conducted a continent-wide survey of early-stage startups in 2023 and then again in 2025 and also built a dataset on established, VC-backed startups from deal records covering 2010–24 that included founders’ education and work histories from LinkedIn.
They find that Africa’s startup ecosystem is dominated by foreign venture capital, which flows disproportionately to foreign-exposed entrepreneurs. Yet founders do not inherently prefer foreign investors. Their study suggests that lowering the cost of local capital and developing more home-grown entrepreneurial talent can reduce the ecosystem’s reliance on foreign capital and foreign exposure while expanding its scale.