The African tech ecosystem is transitioning beyond its initial 'honeymoon phase,' marked by rapid growth and significant funding, into a period of more rigorous scrutiny. Key stakeholders are now posing challenging questions regarding the caliber of startups, the vision, experience, and capabilities of current founders. The focus has shifted from mere hype to evaluating whether ventures address genuine problems and if founders possess the long-term perspective and operational skills required for sustainable business building. Leading this introspective charge is Lagos-based Microtraction, one of Africa’s pioneering indigenous venture firms, known for its early identification of talent and its role in shaping nascent companies, including backing startups like LemFi, Cowrywise, Honeycoin, and PaidHR.

For a pre-seed investor such as Microtraction, the quality of founders is paramount, especially given the absence of extensive historical data for early-stage ventures. Offiong Isyah, an Investment Analyst at Microtraction, observes a decline in the quality of talent within the tech ecosystem, particularly in Nigeria. This has directly impacted the caliber of founders and the businesses they establish. Historically, early Nigerian software engineers, despite resource constraints, pursued excellence through meetups and inviting global experts. However, success has led to decentralization and a reduction in such knowledge-sharing events. Concurrently, a challenging economy has prompted many young Nigerian graduates to seek careers abroad, diminishing the local talent pool that could eventually become future founders. To counter this, Microtraction prioritizes identifying exceptional founders before their potential becomes widely apparent, partly through initiatives like the Microtraction Nurture Programme.

With over 70 investments, Microtraction has refined its criteria for ideal founders. The firm seeks resourceful, intellectually curious individuals with a profound understanding of their customers and product distribution, who are capital efficient, and possess strong domain expertise or unique insights. Beyond providing early investment, Microtraction fosters a collaborative environment through monthly town halls, enabling founders to exchange insights and learn from peers. It also strategically connects founders with potential investors, facilitating relationship-building well in advance of formal fundraising efforts.

While many firms that began as pre-seed investors in Africa have expanded into later funding rounds, Microtraction remains steadfast in its dedication to the pre-seed stage. Ato Bentsi-Enchill, Investment Principal and Head of SPVs at Microtraction, affirms the firm’s purpose: “to be the partner of choice for the early-stage founder,” supporting them in establishing the right fundamentals before pursuing scale. The firm’s current $10 million second fund issues cheques ranging from $20,000 to $100,000, targeting companies with valuations between $1.4 million and $2 million. Isyah highlights a persistent and significant funding gap at the pre-seed stage. Even larger funds, which have diversified into later rounds, are now making smaller pre-seed investments. This competitive landscape, where larger funds often push for higher valuations, sometimes results in Microtraction losing out on deals. However, this pressure has also compelled the firm to sharpen its value proposition and more effectively demonstrate its relevance to founders. Microtraction also exhibits flexibility in its capital sources, largely eschewing development finance institutions. Its second fund notably includes over 30 startup founders as limited partners, alongside general partners from global VC firms.

Recent currency devaluations across major African economies between 2022 and 2024 have compelled startups and investors to rethink strategies, accelerating the imperative to build global businesses from inception. The rationale is clear: generating a substantial portion of revenue in dollars can safeguard a startup’s growth trajectory and insulate it from domestic macroeconomic volatility. Furthermore, a global footprint strengthens its position in fundraising discussions and enhances its appeal as an acquisition target. However, currency risk is not the sole concern. Isyah points out that the current founder pool is heavily concentrated in the fintech sector, which commanded a significant share of funding in both 2024 and 2025. While fintech’s ability to attract capital and deliver exits makes it an appealing area, Isyah argues for a broader focus. He warns against regulatory dependency, citing Nigeria’s 2021 crypto ban as an example, which forced many crypto startups to scramble for survival or shut down entirely. Microtraction aims to mitigate such vulnerabilities by seeking founders who build in “permissionless markets.”

The firm has sharpened its investment focus to include sectors like financial services, on-chain technologies, the creator economy, and fragmented commerce. Microtraction leverages its network, including LPs like Michael Seibel, to open doors for African founders that might otherwise be inaccessible. Strategic partnerships, such as one with NVIDIA, further broaden founders’ horizons, exemplified by a potential AI hackathon designed to engage them in globally relevant conversations. Ultimately, Isyah notes, the success of this sectoral shift hinges on founders themselves and the talent pool they emerge from. This underlies Microtraction’s deliberate strategy of backing founders with a strong long-term vision, deep market insight, and robust distribution capabilities. As Isyah encapsulates, “We need founders that are going to answer the question, ‘Why is three years from now going to be too late?’”