Derin Adebayo cuts through the noise of venture capital hype to ask a question that keeps investors awake at night: after twelve billion dollars poured into African startups, where are the exits? This piece is notable not for its optimism, but for its cold, data-driven reckoning with the gap between capital raised and returns realized. It forces a confrontation with the reality that a booming ecosystem can still be a failing investment vehicle if it cannot convert growth into liquidity.
The Cycle of Hype and Reality
Adebayo begins by dismantling the narrative that Africa is still in its "nascent" phase. The data suggests otherwise. "In the three years after we wrote that essay, African tech brought in $12B of capital (2021 - 2023), roughly double the amount raised in the prior 11 years," Adebayo writes. Yet, despite this massive influx, the continent has generated only a handful of significant exits. This stands in stark contrast to Latin America, Southeast Asia, and India, where public listings have become a regular occurrence. The author's framing is effective because it refuses to use "emerging market" as an excuse for perpetual immaturity. The argument lands hard: if the ecosystem cannot validate itself with returns, it enters decline.
"If said ecosystem does not validate itself, it enters decline."
The piece leans heavily on the "venture cycle" mental model to explain this stagnation. Adebayo argues that venture capital is inherently cyclical, driven by periods of "run-up," "bubble," and "crash." "During a bubble, inflated expectations and heightened deal activity create exit opportunities for investments made during the run-up," they note. This is a crucial distinction. The author posits that the 2010-2017 period was a success story precisely because a few early wins—like Jumia's IPO and Stripe's acquisition of Paystack—returned the capital for that entire era. The problem, Adebayo argues, is that the subsequent bubble (2018-2023) raised seven times more money but has not yet produced exits at a comparable scale. Critics might note that global macroeconomic headwinds have frozen IPO windows everywhere, not just in Africa, but the author's point remains: the local ecosystem has not yet proven it can generate the specific types of exits required to justify its current valuation tier.
The Blitzscale Trap
The commentary then shifts to the specific mechanics of the recent boom: the rise of the "blitzscaler." These are companies that raised massive rounds, hitting unicorn status with valuations in the billions. "Unlike their predecessors, blitzscalers have raised capital and hit valuations which mean that only (multi-)billion dollar outcomes will be seen as 'successful'," Adebayo explains. This creates a dangerous trap. Early-stage companies can be acquired for a few hundred million dollars, but once a company scales to a $3 billion valuation, the pool of potential acquirers shrinks to near zero.
The author uses the divergent paths of Paystack and Flutterwave to illustrate this. Paystack, acquired by Stripe for $200 million, was a capital-efficient success. Flutterwave, which raised over $400 million and hit a $3 billion valuation, now faces a much harder road. "By raising more capital, Flutterwave has committed to a path that means it is more likely to exit through an IPO than an acquisition," Adebayo writes. This is a profound insight into how fundraising strategy dictates exit options. The more you raise, the harder it is to sell. The argument is compelling because it highlights a structural contradiction: the very capital that fueled growth has now made a standard acquisition exit impossible.
The Global vs. Local Dilemma
The final hurdle is the mismatch between investor expectations and local market realities. Adebayo points out that while most capital comes from foreign investors, the businesses operate in African markets. "Exiting globally... usually involves explaining the realities of your market to potential investors who don't quite understand it," they write. Conversely, local stock exchanges are often too shallow to absorb these valuations. "Nigeria and Egypt have three stock exchanges worth 'only' $100B combined (less than 1 Uber)," Adebayo notes, highlighting the liquidity crisis. Even if a company lists locally, it would command multiples that dwarf its peers, making it an anomaly rather than a standard investment.
"African scale-ups would be small fish in global public markets, but on local exchanges, they'd command valuations (and multiples) that dwarf those of other listed companies."
The author suggests that the only viable path for the biggest players is a global Initial Public Offering (IPO), but the bar is incredibly high. "Probably fewer than 20 African startups have ever reached that level–realistically, those are the only companies with any chance at a global IPO," Adebayo asserts. This creates a "late-stage purgatory" where companies are too big to be bought, too small to list globally, and too complex for local exchanges. While the piece identifies Flutterwave as a potential candidate to break this deadlock, the underlying tension remains unresolved. The ecosystem is caught between the need for global scale and the reality of local constraints.
Bottom Line
Adebayo's strongest contribution is the clear-eyed analysis of how fundraising strategy has inadvertently locked African unicorns into an exit dead-end. The piece's greatest vulnerability is its reliance on the assumption that a global IPO is the only valid path to success, potentially undervaluing the long-term potential of consolidation or regional dominance. The reader should watch for whether the next wave of exits comes from a breakthrough IPO or a painful correction where overvalued assets are forced to downsize.