Where Will Your First Million Come From? Funding Pathways for Startups in Emerging Markets

For most African founders, the hardest question is how to fund their ideas. Funding is the single biggest roadblock for startups across the continent. But it’s also a game changer, because capital grows companies and transforms economies.

Africa is no longer just an opportunity, it is the epicenter of profitable investment. In 2022, African startups raised $5.4 billion across more than 900 deals, a record-breaking year even amid global downturns.  With the fastest-growing youth population in the world, rapid urbanization, and expanding consumer spending projected to reach $2.1 trillion by 2025, Africa is where the next wave of billion-dollar businesses will be built.

So where will your first million come from? In this piece, I would break down the funding pathways that founders in emerging markets can realistically tap into and the strategies to make them work.

1. ANGEL INVESTORS & VENTURE CAPITALISTS

Angel investors and VCs provide early-stage capital and open doors to powerful networks. But in Africa, they’re selective. Most want to see scalable models that are region-aware, built for real consumer behavior and not the Silicon Valley assumptions. In 2022, venture capital accounted for over 60% of startup funding in Africa, with fintech attracting the lion’s share of over 40% of total VC dollars.

We’re seeing more diaspora-backed funds like Future Africa and sector-specific investors fintech, agritech, healthtech step in. But competition is fierce.

Founders pitch must tell a story that blends vision with traction. Investors want to see numbers (CAC, MRR, retention), but also proof that your product is embedded in real life. 

2. ACCELERATORS & INCUBATORS

Accelerators and incubators provide seed money, mentorship, networks, and credibility for startups growth. In 2022, African startups backed by accelerators raised 3x more capital than those without.

Programs like MEST Africa, Flat6Labs, and even global ones like Y Combinator have backed startups that went on to raise millions. Accelerators that truly understand emerging market nuances — poor connectivity, cash-based systems, and complex cultural dynamics, outperform those that ignore them.

Founders should choose accelerators that offer ecosystem connections to corporations, regulators, investors rather than just a small cash grant. The right mentor and market entry point can be more valuable than the funding itself.

3. GOVERNMENT INCENTIVES

Grants, subsidies, and tax breaks are increasingly available as governments across Africa recognize the role startups play in job creation and economic growth.

Amidst the challenges of bureaucracy, paperwork delays and shifting policies that frustrate many founders, countries like Nigeria have offered innovation grants for youth-led tech ventures and South Africa runs incentives for early-stage businesses in manufacturing and ICT.

I always commend founders who build early regulatory relationships. A warm introduction at the ministry can cut months off your approval timeline.

4. MICROFINANCE & COMMUNITY-BASED FUNDING

Where banks won’t lend, microfinance institutions (MFIs) step in. Africa is home to over 400 MFIs serving more than 40 million people. They’ve long been the backbone of Africa’s informal economy, providing small loans to farmers, market women and gig workers.

We’re also seeing the rise of community-led funding models: cooperatives, women’s savings circles, and village banking groups. For many founders, this is the first real taste of external capital.

Don’t underestimate the power of community trust. MFIs and cooperatives may not scale you to Series A, but they can prove creditworthiness, validate your model, and keep the lights on in your early days.

5. CROWDFUNDING PLATFORMS

Crowdfunding unlocks something unique: the power of diaspora and global community support. Platforms like Crowdfunder and Thundafund in South Africa enable startups to raise directly from supporters. 

Globally, crowdfunding raised $17.2 billion in 2021, and while Africa is still early in this space, the diaspora community alone sends over $95 billion in annual remittances to Africa. Tapping into even a fraction of that through crowdfunding platforms can seed bold ideas.

The secret here is in the storytelling not the spreadsheets. Campaigns that highlight impact plus emotion outperform those heavy on numbers. People invest when they feel part of a journey.

Most of the time, I say don’t just ask for money, invite people into your story. Show them how their $100 helps a farmer, a student, or a local entrepreneur.

MY THOUGHTS

Your first million could come from an angel investor, a diaspora VC, a microfinance loan, or a community crowdfunding campaign. In principle, the strongest startups diversify their funding strategies, build ecosystems of trust, resilience, and growth. The smartest investors no longer see Africa as a risk, but as a reliable source of returns.

This is where the next billion-dollar businesses will be built. The only question is: who will build them?