African startup funding plunges 80% as investors shift to loans

African startup funding plunges 80% in July as investors favour debt over equity

Funding for African startups collapsed in July 2026, with 47 companies raising a combined $102.2 million — an 80.2% drop from $515.6 million raised by 52 startups in June and an 81.6% fall from $554.3 million in July 2025. Debt financing dominated the month, accounting for $75.5 million, or 73.9% of the total, shifting the capital mix sharply away from equity rounds.

"Nearly three-quarters of the money raised came as loans that the startups are expected to repay," the data shows.

The concentration of capital was pronounced: the 10 largest deals made up $88.85 million, or 86.6% of July’s total, meaning almost nine out of every ten dollars went to only ten companies. The largest single transaction was a $30 million debt facility for Kenyan fintech M-Kopa from Dutch development bank FMO, representing almost 30% of all startup funding across the continent in July. M-Kopa said it will use the financing to support its pay-as-you-go business, including financing electric motorcycles and batteries.

• Bridgement (South Africa) raised $20.3 million from Rand Merchant Bank and Standard Bank to expand lending to small and medium-sized businesses.
• BioLite (Zambia) secured $10.7 million from the Africa Go Green Fund in debt financing for its clean-energy business.
• Nesa Power Group (South Africa) obtained $9 million to acquire solar power assets and expand renewables operations.
• Peach Cars (Kenya) received $4 million in debt from Japanese financial institutions for its used-car marketplace.

Sector distribution highlighted fintech as the clear focus for investors in July, attracting $53.6 million or 52.45% of total funding. Energy and water startups collected $20.2 million, retail $7.8 million, logistics and transport $6.4 million, agriculture and food $5.1 million, services $3.2 million and healthcare just $1.8 million.

Geographically, South Africa led in total capital raised with $38.8 million across eight deals, followed by Kenya with $36.8 million from 13 deals. Zambia’s figures were driven entirely by the BioLite transaction at $10.7 million. Egypt attracted $7 million, while Nigeria — despite a large tech ecosystem — recorded $4.9 million across six deals. Morocco raised $2 million, Ghana $800,000, Tanzania $400,000 and Rwanda $300,000.

The shift toward debt reflects investor caution: equity funding accounted for a fraction of monthly flows, with venture funding at $12.1 million, seed $4.3 million, Series A $3 million, pre-seed $2.5 million and grants $1.3 million. The financing mix gives founders the advantage of retaining ownership but increases pressure through repayment obligations, particularly for startups still building steady revenue streams.

Industry observers warn the funding squeeze will intensify scrutiny on unit economics and profitability. Startups are being pressured to show proven products, steady revenue and clear paths to cash generation as investors prioritise lower-risk deployments of capital. The near-term outlook points to continued preference for lending instruments and larger allocations to a handful of firms with established traction.