Africa’s Agrifood Investment Shifts Toward Sustainable, Unit-Economics Startups

The African agrifood startup ecosystem is at a turning point where financial sustainability is becoming as critical as social or environmental impact. As Sherief Kesseba, managing partner at Climate Resilient Africa Fund (CRAF), states, less than 5 percent of global venture capital flows to Africa, and much of that into agrifood comes from development finance institutions (DFIs) rather than purely commercial investors. For maturation, commercial capital must penetrate the sector, allowing DFIs to concentrate on early-stage, high-risk bets.

Investment professionals are now scrutinizing unit economics rigorously. Growth for its own sake — a characteristic of many Silicon Valley-inspired models — is failing to account for the high fixed costs and complexity of agricultural supply chains in Africa, particularly in the first and last mile. Startups that scale rapidly without tightly managing margin structures are experiencing high mortality rates. This trend is supported by broader industry data: according to sector overviews, many mid-sized value chain actors cannot access financing because loans and credits are misaligned with their scale and risk profiles.

Notably, funds focused on agriculture, climate solutions, and the nature economy are gaining traction. CRAF invested in Winich Farms, which provides financial services to smallholder farmers and smaller offtakers, enabling revenue growth through formalization, and Sea Gardener, an aquaculture startup in Egypt eyeing both domestic sales and export markets. Though these investments are small in size — $100,000 to $200,000 — they are strategically placed to tap markets with strong fundamentals.

The funding gap in African agrifood is large — estimated at US$75–100 billion annually. Other data corroborates this: for example, experts at a 2025 conference highlighted a $75 billion financing gap for smallholder farmers and agribusiness SMEs, and separate reports estimate unmet credit needs for mid-tier agribusinesses around US$90 billion, with over 80 percent of demand going unmet.

Regulatory change and technology are emerging as both a challenge and a vector of opportunity. New European regulations on traceability, deforestation, and environmental impact are compelling exporters to adopt more stringent standards — a major opportunity for startups offering tools for compliance, data, and satellite or digital agritech solutions. These shifts are reshaping what constitutes “investible” in agrifood and pushing investors and founders to make business models more defensible.

Looking ahead to 2026, growth is expected to come via clustering smallholder farmers, addressing supply chain inefficiencies (especially cold storage, logistics, processing), and deepening climate-smart agricultural solutions. Founder quality, understanding of local markets, and capital efficiency are likely to remain primary screening criteria. Strategic imperatives will include identifying interventions with scalable unit economics, mitigating risk through tech and regulation alignment, and developing the “missing middle” — mid-tier agribusinesses that are often overlooked.

Strategic Implications and Open Questions:

• Investors with patience and local presence may outperform: smaller ticket sizes focused on early-stage ventures could produce outsized returns if ecosystems evolve.
• Blended finance, risk-sharing, and impact-to-commercial capital transitions will be critical to unlock higher valuations and financiers for agrifood startups.
• Which regulatory environments (both domestic and international) will prove most favorable for traceability, trade, and sustainability — and which will impose unsustainable burdens?
• How can mid-tier agribusinesses (“missing middle”) access financing aligned with their scale and risk profile? Will innovations such as social lenders and impact funds scale sufficiently?
• What role can governments and public policy play to de-risk investments (e.g., via guarantees, infrastructure, enabling regulations) without crowding out private capital?