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Over the last few months, I have been watching a wave of M&A announcements wash across the African tech press: “Company A acquires Company B. This is a strategic consolidation and a landmark deal. What a great outcome for the ecosystem. Our ecosystem is maturing!” 

And every time, I find myself reading the same framing: that this is a win. For founders. For investors. For the ecosystem. 

Sometimes it is. But a lot of the time, it is not. And nobody is saying that out loud. 

Through my work investing in Africa, I have had the opportunity to participate in different types exits. That experience is what I want to draw on today. 

Not all exits are equal. And the longer we pretend otherwise, the more damage we do to the founders building today and the investors considering backing them.    

When every exit gets reported as a success story, two things happen. Both are bad. 

First, it misleads new investors. Africa is still a market that needs to attract capital. When limited partners or angel investors see a string of acquisition headlines with vague LinkedIn praise posts, they form a view of what the return profile of this ecosystem looks like. If those headlines are not being contextualised, people are making allocation decisions based on a distorted picture. That eventually comes back to bite everyone when the returns do not match the narrative. 

Second, it gives founders the wrong map. When a founder sees a company get acquired and reads nothing but glowing coverage, they naturally start to model their own trajectory against that outcome. But if that acquisition was a distressed sale at a fraction of the last valuation, or an acqui-hire where the product got shut down, or a strategic bolt-on where early investors barely made their money back, the founder is building to a benchmark that does not reflect reality. That is not a small problem.

This is the one everyone is imagining when they see an acquisition headline. A well-capitalised buyer, a bank, a telco, a global payments player, pays a multiple above the last valuation because your business solves a problem they cannot build fast enough internally. Investors get strong returns. The founder often stays on to run the combined entity. This is the headline that gets celebrated. 

But let me be clear: this is the least common type of exit in Africa right now. We have seen a handful. Not dozens.  

This is what happens when a company has built something genuinely useful, but not something that can stand alone as a durable, independent business. The product is interesting. The technology works. But the unit economics never quite closed, or the market was too narrow, or the distribution was always going to require a bigger balance sheet than the startup could raise. Most acquisitions in the last year or two have been in this bucket. 

The acquirer buys the product to fold it into their own stack. The startup ceases to exist as a standalone entity. The team may or may not stay. Early investors may or may not get their capital back, depending on the liquidation preferences sitting above them on the cap table. 

This is not a failure. But it is also not the outcome that the pitch decks imagined. And it is definitely not the benchmark investors are hoping happens.   

Here the acquirer is not buying the product at all. They are buying the team. The product gets shut down, migrated, or quietly deprecated. The founders and engineers join the acquiring company on employment contracts with retention packages tied to vesting schedules. 

For the founders, this can feel like a respectable landing after a difficult few years. For investors, the returns are usually negligible. The acquisition price in an acqui-hire is rarely structured to generate meaningful distributions, especially after liquidation preferences, legal fees, and the mechanics of winding down a corporate entity across multiple jurisdictions.  

This is the hardest one to talk about, and the one that gets dressed up most aggressively in ecosystem-friendly language. The company is running out of runway. A strategic or financial buyer steps in at a price that keeps the lights on and gives early investors some kind of return, but well below what the cap table implied at the last round. 

Founders in this situation often feel relief. After years of managing payroll, regulatory headaches, and investor pressure in markets like Lagos or Nairobi where the macro environment has been unforgiving, taking any offer feels rational. And sometimes it is rational. 

But a distressed sale at 0.4x the last valuation, positioned in the press as a strategic consolidation, is not a data point that should be shaping anyone's view of what African startup exits look like. 

If you are a founder building in Africa right now, know which exit your business is actually building toward 

Not every business needs to be a $100 million strategic exit to be a good business. But you need to be honest with yourself and your investors about which category you are building in. 

If your product is genuinely differentiated and your market is large enough to support a standalone business, you should be building toward the Strategic Premium. If you are building a useful product in a narrow vertical that a larger player could absorb, that is a Feature Acquisition outcome, and there is nothing wrong with that if you go in eyes open. 

Where founders get into trouble is when they are building for the Strategic Premium but their business fundamentals are quietly heading toward a Distressed Sale. That gap usually widens slowly and then before you know it you are in a distressed sale. 

Action Step: Write down the exit type your business is most likely to achieve at its current trajectory, not the one you are hoping for. Then write down what would have to be true for you to move up one category. That gap is your strategy.

The African tech ecosystem is maturing. That is genuinely good news. More capital, more exits, more deal flow, more institutional interest. But maturity also means we need to start having more honest conversations about what is actually happening inside these transactions. 

Right now, we are telling a story about exits in Africa that is cleaner and more optimistic than the reality. That story attracts some capital in the short run. But when the returns do not match the narrative, the people who believed the story stop investing. And the founders who built to the wrong benchmark are left wondering what went wrong. 

We do not need to be pessimistic about this ecosystem. I am not. We have real exits, real returns, and real companies being built for the long term. But we do need to be precise. Because founders who understand the real exit landscape make better decisions about the business they are building. And that is the whole point. 

If this was useful, share it with one founder in your network who is watching the M&A headlines and drawing the wrong conclusions. They need this framework before their next board conversation. 

That's all for today. As always, thank you for being an engaged reader. Let me know your thoughts on this issue. I read all your emails.

Until next time,

Jasiel

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The information contained in this newsletter is intended for discussion purposes only. This newsletter contains the current, good faith opinions of the author but not necessarily those of Accion Impact Management, LLC (“AIM”). The newsletter is meant for educational purposes only and should not be considered as investment advice or a recommendation of any type.  The documents may contain forward-looking statements.  These are based upon a number of assumptions concerning future conditions that ultimately may prove to be inaccurate. Such forward-looking statements are subject to risks and uncertainties and may be affected by various factors that may cause actual results to differ materially from those in the forward-looking statements.  Any forward-looking statements speak only as of the date they are made and AIM assumes no duty to and does not undertake to update forward-looking statements. This newsletter is not an offer or a solicitation for the sale of a security nor shall there be any sale of a security in any jurisdiction where such offer, solicitation or sale would be unlawful. An investment with AIM involves a degree of risk, and may only be made pursuant to the respective offering documents and organizational materials governing such investment.