When Terra Industries announced its latest funding round last week, the news was met with widespread excitement not only because of the capital raised but also because a Nigerian defence technology startup had secured one of the largest seed rounds ever by an African technology startup. In a continent where hardware startups rarely attract significant venture funding, the raise felt like a rare win.
But the celebration quickly gave way to a more pointed debate. Terra’s funding was framed by some not just as a milestone for African innovation but as an indictment of African venture capital. Despite the scale and ambition of the company’s mission, African investors were notably absent from the round, though it is worth noting that Terra’s first institutional raise did include local funds.
The takeaway, for critics, was that African venture capitalists lack the conviction of their Silicon Valley counterparts, shying away from true moonshot projects in favour of safer, more predictable bets.
Yet this framing raises a deeper question that goes beyond Terra Industries itself. Do African VCs truly lack conviction, or are they operating within constraints that fundamentally shape what conviction looks like in practice?
The myth of no conviction
The idea that African investors lack the ambition to back bold projects is hardly new. But it has gained renewed traction in recent years as global venture capital norms have shifted and capital has become more selective. And while the criticism is not entirely unfounded — there are, by many accounts, investors who are overly conservative or who apply private equity principles to the venture capital asset class — it tells only part of the story.
Founders routinely describe being turned away for building in unproven markets or operating in sectors where they lack prior professional experience. Yet investors argue that these rejections cannot be separated from the realities of the environments in which they operate.
Fisayo Durojaye, General Partner at Ancestors Advisory, pushes back on the notion that African VCs fundamentally lack conviction, arguing instead that any assessment of investor behaviour must be grounded in structural constraints.
“I know investors that have backed emerging technologies on the continent, so it’s not true that African VCs don’t back ambitious projects, but those constraints are real,” he notes.
Many local investors, he notes, are currently raising their second funds. For these firms, the promise and optimism that characterised the first wave of African venture capital fundraising no longer carry the same weight with limited partners. Today, investors are judged less on narrative and more on the performance of their earlier bets.
That pressure is compounded by the limited pool of capital available to African VCs. Most early-stage funds on the continent manage less than $20 million, and perhaps more critically, there are still too few of them.
Smaller fund sizes mean fewer investments, less diversification, and significantly less tolerance for failure. In such an environment, investment behaviour is shaped less by appetite and more by constraint. A single misstep can have outsized consequences, not just for a portfolio company, but for an investor’s ability to raise future capital.
Kristin Wilson, Managing Partner at Innovate Africa Fund, echoes this view, while acknowledging that some investors default to playing it safe. She notes that between the cheque sizes startups increasingly require and the valuations they demand, many VCs find themselves priced out of rounds even when they have genuine interest in backing a company.
Timing also plays a role. A startup may be exciting but still fall outside an investor’s mandate or stage-specific checklist, forcing a pass that can easily be misread as a lack of belief.
“When you see a deal matters. If you are a seed-stage investor, you have a certain checklist that you are working with, so it doesn’t matter how exciting a company is; you may still have to turn certain investments down,” Wilson says.
She adds that this pragmatism is further exacerbated by the length and difficulty of fundraising itself. The longer it takes to raise a fund, the narrower the margin for error becomes.
What ambition looks like in practice
Still, Durojaye points to several early bets as evidence that African investors have backed startups operating in sectors with little in the way of proven success signals. Kenyan automaker Mobius Motors raised more than $50 million before its 2025 acquisition, attracting capital from several local investors.
Similarly, Mono and Okra collectively raised nearly $40 million from investors — many of them local — well before open banking gained mainstream traction. These bets suggest that African VCs are willing to back emerging categories before clear market validation.
Yet a closer look at the startups that consistently attract funding reveals that while investors may be interested in new sectors, considerations around eventual exit opportunities often prove decisive. Prior experience matters, but so too does the visibility of a realistic path to liquidity. Where that path is unclear, investors may choose to pass on a startup despite its promise.
Durojaye also points to the fixed lifespan of venture funds as a limiting factor. With a typical ten-year cycle, investors have little room to back sectors facing deep operational or structural constraints. Wilson echoes this view, noting that many past investments were made on the assumption that critical infrastructure or policy reforms would materialise. When those changes failed to occur, it left investors more cautious and less optimistic about repeating similar bets.
It is in this context that Terra Industries must be understood. Backing a capital-intensive, defence-focused hardware startup at the seed stage may signal ambition in ecosystems with deeper capital pools and clearer government procurement pathways. For smaller African funds, however, such a bet could reshape or even threaten their entire portfolio.
The absence of local capital, then, may say less about a lack of belief in Terra’s vision and more about the asymmetry of risk local investors are forced to absorb.
A case of misaligned expectations
On the other side of the debate is the accusation that local investors are simply unable to identify great startups. Both Durojaye and Wilson push back on this view, arguing instead that many founders themselves lack a clear understanding of what a venture-scale business actually looks like.
According to Durojaye, while founders may be building strong, profitable businesses for themselves, those businesses are not always capable of delivering venture-scale returns even when they grow into sizable companies.
“Every founder that got money around 2021 believed they could build the next Flutterwave or Paystack. How many of them built it?” he asks.
“A lot of times, founders think we’re just talking about the merits of their business alone. We’re not. We’re talking about the merits of the business, how much money you can make me, who can potentially buy this business, and how much the person is willing to pay for it. So you’re pitching me, and I’m asking different questions that have nothing to do with the quality of your business.”
For Wilson, the issue runs even deeper, extending to the mechanisms investors use to identify promising startups in the first place.
In more developed ecosystems, she notes, even relatively unsophisticated investors can take cues from reputable accelerators such as Y Combinator. In Africa, however, no equivalent institution exists at sufficient scale. More troubling still, Wilson argues that the accelerator and incubator model on the continent is fundamentally broken, with many of the startups that pass through such programmes ill-suited for venture capital.
“You can win as many competitions as you like, but you still don’t have a viable VC-backable business. So the thing is we don’t have enough VC-quality products. The type of business that the government supports should not be the same type of business that a VC backs,” she says.
Looking ahead, Wilson argues that responsibility must be shared across the African venture capital and startup ecosystem. Many angel investors remain reluctant to back startups at the earliest stages, limiting founders’ ability to build traction before approaching pre-seed investors who now demand more proof than ever.
At the same time, founders, observing investor hesitance toward unproven sectors, increasingly build companies optimised to raise capital rather than to solve meaningful problems.
The result is a distorted venture landscape with some moonshot ambitions but lacking the foundational support required to sustain them. To correct this, Wilson argues, early-stage investors must develop better ways to identify promising startups much earlier and provide the support needed to shepherd them through the most fragile stages of venture-building.
If ambition is defined by cheque size, sector risk, or comparisons to Silicon Valley, African VCs may indeed appear cautious. But if ambition is measured by the willingness to build durable companies within tight constraints, limited capital pools, and uncertain exits, then the question is not whether African investors lack ambition but whether the standard by which they are judged truly accounts for their reality.
