Kenya has lost its spot as Africa’s top startup funding destination after inflows to Egypt overtook it, underlining the impact of depressed investment activity in the six months to June 2026.

Records show that startups in Kenya attracted $126 million (Sh16.3 billion) in the first half of 2026, to rank third behind Egypt, which attracted $327 million (Sh42.3 billion), and Nigeria, with $254 million (Sh32.9 billion).

The other ‘Big Four’ startup ecosystem on the continent, South Africa, was fourth with $83 million (Sh10.7 billion) raised, according to new data from startup funding tracker Africa: The Big Deal.

The first-half performance in 2026 marks Kenya’s weakest funding haul since early 2021 and is also a decline from the $227 million (Sh29.37 billion) raised in the same period last year.

It also coincided with mounting pressure on venture founders to demonstrate sustainable business models to investors after the collapse of several high-profile startups last year.

“Egypt’s share of the total funding raised on the continent in H1 was at its highest since we started tracking,” the report says.

“On the opposite side of the spectrum, after a pretty impressive H2 2025, Kenya fell to its lowest level since early 2021.”

But the tracker noted that the figures exclude electric mobility company Spiro, which raised $327 million (Sh42.3 billion) during the period.

Spiro had previously been classified as a Benin company, but it has since relocated its headquarters to Nairobi and maintains a holding company in Dubai. Africa: The Big Deal said it will now classify the firm as a Pan-African company to reflect the geographical spread of its operations.

Beyond the “Big Four”, Tanzania emerged as the fifth-largest funding destination with $52 million (Sh6.7 billion), followed by Côte d’Ivoire with $45 million (Sh5.8 billion) and Morocco with $28 million (Sh3.6 billion).

Kenya also ranked third by the number of startups closing funding deals worth more than $100,000, with 25 companies, behind Nigeria (40) and Egypt (26) but ahead of South Africa (19).

In 2025, Kenya was Africa’s leading venture capital destination, when startups raised $984 million (Sh127.4 billion at current exchange rates), accounting for nearly a third of the continent’s $3.2 billion in venture funding.

Read: Kenya remains on top with Sh127bn startup funding in 2025

This was a 52 percent growth from $638 million in 2024, largely driven by large-ticket deals involving companies such as the asset financing firms M-Kopa and Sun King, as well as the clean cooking energy startup Burn.

The latest funding slowdown coincides with what industry analysts say is pressure on founders to demonstrate strong unit economics to win investors.

Investors say capital remains available but is increasingly flowing only to startups that can demonstrate a clear path to profitability, especially in the wake of recent startup collapses in Kenya.

Over the past year, Koko Networks wound up its Kenyan operations after failing to secure approval to export carbon credits, electric mobility startup eBee laid off most of its workforce, and buy-now-pay-later firm Lipa Later entered administration.

The mobile money transfers startup Bonto, telemedicine provider Antara Health and health technology firm Ilara Health also restructured or cut jobs amid delayed investor commitments and rising operating costs.

“Capital is being deployed far more discerningly. Investors have dry powder, but the bar has been raised significantly,” Push Venture Capital partner Benjamin Singh recently told the Business Daily.

“This year will see a flight to quality, with investment directed toward founders who can demonstrate a clear and realistic path to break-even.”

Across the continent, startups raised $1.36 billion (Sh176 billion) in the six months to June, a slight increase from the $1.44 billion recorded in the first half of 2025. About two-thirds of the capital came through equity financing and the remainder through debt, with 190 ventures raising at least $100,000.

The data shows that most of the capital went to startups in the fintech (financial technology) and logistics and transport sectors, which attracted $556 million and $472 million, respectively. This was 76 percent of all funding raised during the period.

→ dmusau@ke.nationmedia.com

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