African tech’s honeymoon phase is over. After years of rapid growth, headline-grabbing funding rounds, and a surge of new startups, some of the ecosystem’s most important stakeholders are beginning to ask tougher, more uncomfortable questions, not just about the quality of startups being built, but also about the vision, experience, and capabilities of the current crop of founders.
Are these ventures solving real problems, or chasing hype? Do the founders have the long-term perspective and operational skill needed to build enduring businesses, or are they relying on luck and momentum?
Among those raising these questions is Lagos-based Microtraction, one of Africa’s earliest indigenous venture firms. Since its founding, Microtraction has backed startups such as LemFi, Cowrywise, Honeycoin, and PaidHR, building a reputation for identifying talent early and shaping the trajectory of nascent companies.
The founder quality question
For a pre-seed investor like Microtraction, founder quality is everything. In the absence of historical data to judge a startup, investors must depend on their assessment of founders.
For Offiong Isyah, Investment Analyst at Microtraction, the quality of talent in the tech ecosystem, particularly in Nigeria, has declined, directly impacting the calibre of founders and the businesses they build.
Despite operating in a resource-constrained environment, early Nigerian software engineers strove for excellence, organising meetups that allowed them to compare notes and to have experts from across the world fly in to share industry best practices.
But with success has come decentralisation and a reduction in such events. At the same time, a poor economy has forced many young Nigerian graduates who would have ideally gained experience locally to seek careers outside the country, thus reducing the pool of talent that could potentially found startups a few years down the line.
To this end, a key priority for the firm is to find great founders before they become obvious. One way it is doing that is through the Microtraction Nurture Programme.
With more than 70 investments under its belt, Microtraction says it has refined its taste for founders. The ideal Microtraction founder is resourceful, intellectually curious, has a deep understanding of their customer and how they distribute their product, is capital efficient, and either possesses strong domain expertise or insights.
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Aside from investing early in these founders, the firm organises monthly town halls to provide founders with an avenue to compare notes and learn from one another. It also connects the founders with potential investors, enabling them to build relationships long before actual fundraising begins.
Pre-seed and proudly so
Quite a few firms that started out as pre-seed investors on the continent have gone on to invest in later rounds, but Microtraction is adamant that it won’t take that route.
“Our purpose, we believe, is to be the partner of choice for the early-stage founder. We’ll support them in that journey, ensuring that they have the right fundamentals in place before they can chase scale,” Ato Bentsi-Enchill, Investment Principal and Head of SPVs at Microtraction, shares.
Its current fund — the firm’s second — is a $10 million vehicle through which it writes cheques ranging from $20,000 to $100,000, typically targeting companies with valuations of $1.4 million to $2 million.
According to Isyah, a significant funding gap persists at the pre-seed stage. Even funds that have shifted their focus to later rounds have begun making smaller pre-seed investments. But that dynamic comes with trade-offs.
Competing with larger funds — which often push for higher valuations — means the firm occasionally loses out on deals. At the same time, that pressure has forced it to sharpen its value proposition and work harder to demonstrate its relevance to founders.
This flexibility also shows up in the sources of capital it pursues. While development finance institutions have been key in Africa’s venture capital landscape, the firm has largely stayed away from receiving capital from them. Its second fund, for example, had more than 30 startup founders as limited partners and included general partners at global VC firms.
Beyond fintech and into permissionless markets
Currency devaluations across some of Africa’s largest economies between 2022 and 2024 forced a reckoning for startups and investors, accelerating calls to build global businesses from day one.
The logic is simple: generating a meaningful share of revenue in dollars can help protect a startup’s growth narrative and cushion it against macroeconomic shocks at home. Beyond that, a global footprint strengthens its hand in fundraising conversations and positions it as a more compelling acquisition target further down the line.
But currency risk is only part of the concern. Isyah notes that today’s founder pool is heavily skewed toward one sector — fintech, which accounted for a significant share of funding in both 2024 and 2025.
Fintech attracts capital; therefore, founders in an environment where funding has dropped naturally prioritise the sector they can get funded for. It is also one of the few sectors that has delivered exits for founders and investors, making it an understandably compelling space to build in.
Still, Isyah argues that both founders and investors need to look beyond fintech. One risk he highlights is regulatory dependency. When most viable startups in a country are concentrated in a single, tightly regulated sector, the entire ecosystem becomes vulnerable to policy shifts.
Nigeria’s 2021 crypto ban is a case in point. The directive sent many crypto startups scrambling for legitimacy and survival; several shut down altogether. Isyah is keen to avoid a repeat of that scenario and believes it requires a shift in founder focus.
“We want founders that are building in permissionless markets,” he shares.
The firm has already sharpened its investment focus, concentrating on startups operating in sectors such as financial services, on-chain technologies, the creator economy, and fragmented commerce.
Helping founders think about how they can build in different sectors is another area where Microtraction believes its network can shift the odds. With LPs like Michael Seibel, the firm can open doors that might otherwise remain closed to African founders. Partnerships with companies like NVIDIA also help broaden founders’ horizons, including initiatives such as a potential AI hackathon designed to push them into more globally relevant conversations.
Whether this shift happens, Isyah notes, depends largely on founders themselves and the talent pool from which they emerge, and that’s one reason Microtraction has become more deliberate about the founders it backs, prioritising long-term vision, deep market insight, and strong distribution capabilities.
“We need founders that are going to answer the question, ‘Why is three years from now going to be too late?’”
