A current report by the African Enterprise Angel Community (ABAN) reveals that 77% of African angel traders have invested lower than $25,000 in startups between 2022 and 2024. The discovering factors to a cautious, risk-averse strategy amongst traders within the continent’s startup ecosystem.

The report, primarily based on a survey of over 110 angel traders who’ve backed African startups, highlights key traits in early-stage funding. Information was additionally gathered via ABAN’s collaboration with Briter, a enterprise analytics platform targeted on startup funding.

Whereas most angel investments stay beneath the $25,000 mark, the report signifies that the share of angel traders committing between $50,001 and $250,000 has been rising steadily. Nevertheless, no particular determine was supplied for this development.

Angel funding performs a vital position in financing early-stage startups, particularly in markets the place entry to enterprise capital may be restricted. Nevertheless, the high-risk nature of those investments—usually in unproven enterprise fashions—results in hesitancy. Regardless of these challenges, startups require funding to scale and unlock their potential for vital progress. The report means that elevated schooling and entry to raised information might assist traders make extra knowledgeable selections and mitigate perceived dangers.

Funding devices: Danger urge for food and preferences

The report additionally exhibits African angel traders’ diversified approaches, relying on their threat tolerance and funding objectives. Half of these surveyed go for fairness investments by way of Easy Agreements for Future Fairness (SAFE), a instrument usually utilized by risk-tolerant traders who hope for top returns in the long term.

In the meantime, 28% of angel traders choose debt devices, comparable to convertible notes or loans. These choices supply faster returns and shorter timelines, interesting to extra risk-averse traders on the lookout for a sooner payoff with out fully forgoing a stake in early-stage ventures.

Shift towards structured funding autos

The angel investing panorama in Africa is evolving from particular person traders making selections primarily based on private connections to extra collaborative approaches. 46% of the surveyed angels now choose investing via structured autos like angel syndicates, which permit for shared threat, pooled sources, and entry to a broader deal circulate. An extra 28% use a versatile mixture of particular person and collective methods, whereas 26% choose to speculate independently.

Maha Mandour, CEO of COREangels MEA, underscores the significance of a methodical strategy: “Scouting and filtering startups, coupled with thorough due diligence, is vital to attaining higher returns in angel investing.”

A powerful sense of function drives funding

Angel traders in Africa are sometimes pushed by extra than simply monetary returns. The ABAN report highlights that 59% of respondents are motivated by the potential for job creation and poverty discount in Africa, whereas 19% concentrate on empowering youth and girls via their investments. A smaller however vital 10% prioritize funding for local weather options.

The report additionally sheds gentle on the rising choice for technology-driven startups. 42% of traders are significantly drawn to ventures that leverage technological innovation, a development that mirrors the broader enterprise capital panorama the place tech-centric sectors like fintech, e-commerce, and power proceed to draw the majority of funding. Enterprise capitalists invested over $1.8 billion in these sectors in 2024 alone.

Nevertheless, many angel traders keep diversified portfolios. Round 25% of respondents point out a sector-agnostic strategy, displaying a wide-ranging curiosity in industries throughout the African continent, from agriculture to healthcare and past.

Between 2008 and 2023, angel traders have collectively invested $35 million into African startups. Because the sector matures, extra angel networks are rising to assist traders, supply coaching, and supply higher entry to information. This evolution helps to demystify angel investing, broaden investor attain, and enhance decision-making.

Whereas the African angel funding sector is evolving and rising, the report stresses the significance of schooling and data-driven decision-making to foster larger confidence and bigger investments sooner or later. Given the dangers, the present cautious strategy is comprehensible, however elevated data and community constructing might pave the best way for a extra vibrant angel funding ecosystem throughout the continent.