New findings have revealed how and why African pre-seed funding has continued to shrink amid growth in the region’s startup ecosystem.

Data from Africa: The Big Deal revealed a troubling trend: pre-seed equity, the crucial $100,000 to $500,000 first cheques, has been thinning for three consecutive years, even as the broader market stabilises.

It noted that the funnel was narrowing precisely when the number of would-be founders was swelling, stressing that the first cheque, the lifeblood of early-stage innovation, was disappearing.

According to the report, while it was tempting to blame AI for soaking up capital, the numbers told a different story.

Leveraging Africa: The Big Deal, Digital Africa CEO, Grégoire de Padirac, explained that in the first half of 2026, AI-related startups accounted for just 14 per cent of funding, with truly AI-native ventures capturing under two per cent.

He disclosed that most of the money flowed into fintech, including credit scoring, fraud detection, payments and deep tech, largely at seed and pre-seed stages.

Crucially, he said 86 per cent of AI funding went to the “Big Four” markets: Nigeria, Egypt, South Africa and Kenya.

He submitted that, far from crowding out other sectors, AI remained a small, concentrated slice of Africa’s startup landscape.

According to him, the real issue was structural. “Globally, capital is concentrated in established managers and serial founders, leaving emerging funds, the ones most likely to write first cheques, starved.

“Latin America’s pre-seed deals fell 77 per cent from their 2022 peak. Southeast Asia’s early-stage volumes shrank to a third of 2021–22 levels. India’s seed funding dropped by a quarter. Even in the United States, seed dipped while later stages recovered.

“Africa fits the pattern, but feels it more acutely: foreign capital dominates, and domestic institutional buffers are almost nonexistent.”

De Padirac said fixing the problem required more than money, noting that the weakness lay at the transitions from seed to Series A, where investor coordination and patient public capital mattered most.

According to him, commercial limited partners (LPs) were right to prioritise stability and returns.