Secondaries are limiting Africa’s VC ecosystem. Can data help?

Two years ago, my colleague wrote in this newsletter about how a data gap hinders startup fundraising. Today, that data gap is doing the same to Africa’s venture capital (VC) ecosystem by limiting transparency around exit decisions.

Secondaries—investors selling shares in startups to each other—dominate exits in Africa, given the absence of IPOs and a dull mergers and acquisitions market. Relying solely on secondaries is not ideal, but most African fund managers prefer taking what’s available today rather than waiting for an uncertain future in a volatile market—especially as their fund cycles are coming to an end.

The secondary market operates on a willing-buyer, willing-seller model. Under this arrangement, buyers typically hold more leverage because sellers often face pressure to secure liquidity. Given this leverage, buyers typically offer to buy shares at significant discounts, which can sometimes reach 40%.

An early-stage pan-African VC firm missed an opportunity to exit from a Kenyan digital commerce marketplace at a $100 million valuation before the startup’s valuation fell to zero because it rejected a 50% discount proposed by other investors.

Another early-stage firm that sold secondaries at a fintech’s recent fundraise also took a 30% discount from the valuation. These haircuts can make smaller funds struggle to meet LP return expectations—a 3x return on the fund—when their stakes in startups are consistently sold at discounted valuations.

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Secondaries are the most common forms of exit, and as smaller funds consistently take valuation haircuts in these deals, they might struggle to return their funds. When a firm fails to provide attractive returns, it will struggle to raise subsequent capital. This can lead to a gap in funding for early-stage startups and slow the growth of African startups.

How can data help?

Most of the data available in Africa’s VC ecosystem today is the annual funding raised. While useful, more impactful metrics—like the likelihood of finding a fund-returning startup at the early stage, average fund performance, or risk profiles across funding stages, which can influence valuations and cheque sizes at the early stage—are either absent or notoriously difficult to obtain.

Accurate and comprehensive data on historical exit multiples, sector-specific performance, stage-specific risk profiles, and regional comparables could provide benchmarks and reduce the valuation mismatch between early and later-stage investors. For instance, if data reveals that fintech exits in Nigeria typically achieve 5x returns, smaller VCs could negotiate better terms when selling secondaries in these fintechs.

Carta, a cap table management platform, released a report in 2024 that provided data for America’s VC industry, which helped inform investment decisions, valuation standards, and portfolio strategies. In Africa, however, the data gap is causing uncertainty around valuations and exit potentials.

These insights can also help investors price deals more accurately, reducing startup overvaluations that hinder exit opportunities. With clear data on average startup valuations, early-stage investors can invest more precisely, preventing valuation mismatches and the surprise factor that leads to steep secondary discounts.

Reliable and readily available data could also reduce the perception of excessive risk associated with African startups among international investors. If comprehensive data clearly outlines the actual risks involved, international LPs and potential acquirers may view Africa’s startup ecosystem more favourably.

Looking ahead

Building a robust data infrastructure is no small feat—just ask my colleagues at TC Insights, the research arm of —it requires patience, stakeholder buy-in, and significant capital. VC firms, LPs, and startup founders must be willing to share data while respecting confidentiality agreements, which can limit the amount of information they disclose.

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One workaround to the confidentiality conundrum is focusing on sector-specific or regional data rather than individual company metrics. A fintech-focused investor exposed to Nigerian startups can share aggregated data on the expected performance and valuation of fintech startups in Nigeria, highlighting key metrics that indicate business viability and valuation.

A16z, one of the largest VC firms in the world, has been releasing data on the AI voice market, which is helping educate startup founders on the VC expectations of their businesses. Njavwa Mutambo, the founder of Caantin, told me that their research has helped guide how he’s building and selling his AI voice agent business to financial institutions and presenting his business to investors.

Startups also have to willingly report and benchmark their performance, which can foster the type of transparency that can help investors secure optimal returns on startup investment—a tough ask for African startups. This cultural shift can also help the ecosystem mature; the information in Stripe’s annual letter helped establish that AI startups are making more money than SaaS startups at the same stage of infancy. This data has helped fuel investor confidence in AI startups that have gone on to raise mountains of cash.

Data alone will not completely solve the ecosystem’s problem, but improved visibility into performance metrics and valuations can reduce the friction in secondary transactions and provide more exit routes. For this to happen, we must be ready to learn from it when that data becomes available.

Muktar Oladunmade

Associate Reporter,

Thank you for reading this far. Feel free to email muktar[at]bigcabal.com, with your thoughts about this edition of NextWave. Or just click reply to share your thoughts and feedback.