The conversation about VC and Africa has been stuck on the wrong question. It isn't whether the model is broken. It's whether we ever understood what the model was actually for. A few days ago, I wrote about a post by Uwem U. that argued the VC model was never built for Africa. I agreed with part of it — and pushed back on the rest. The response surprised me. Not because people disagreed, but because of the one question that kept coming up, from founders and operators who'd clearly been sitting on it for a while: "Why does a company with no profits get a billion-dollar valuation, while an SME doing 40% margins can't get a meeting?" It's the right question. And the honest answer is that we didn't just change how businesses get funded. We changed what a "strong business" even means — and in doing so, built a system that consistently misreads real value. The Insight That Started It All — and How It Got Away from Us In the early internet era, investors noticed something genuinely true: some businesses needed to lose money aggressively now to own a market so completely that the profits later would dwarf anything earned by being cautious early. Amazon is the canonical case. Jeff Bezos bled cash for nearly a decade. Wall Street was skeptical. But the thesis held: if you could own e-commerce distribution before anyone else built the infrastructure, the returns would be asymmetric. They were. The logic was sound — for a narrow class of businesses. Businesses with genuine network effects. Markets with winner-take-all dynamics. Opportunities large enough that owning the space justified years of losses. The model wasn't irrational. It was a specific instrument for a specific job. Then it got detached from its preconditions. And applied to everything. How VC Actually Works — and Why Profitability Became Irrelevant To understand why a profitable SME can't get a meeting, you need to understand the fund mechanic, not the investor's character. A VC raises a $100M fund. Their investors — pension funds, endowments, family offices — expect 3x back. That's $300M. The fund makes roughly 20 bets. Most fail. The math is unforgiving: the handful of winners need to return 20x, 30x, sometimes 50x, just to make the portfolio work. This means a VC is structurally incentivised to fund companies that could be worth $1B+. Not companies that will definitely be worth $50M. A business doing 40% profit margins on $200K annual revenue is an excellent business. It might exit at 5–8x revenue — call it $1–1.5M. That doesn't move the needle on a $100M fund. It's not that investors disrespect that business. It's that it doesn't fit the instrument. And so valuation became a narrative tool rather than a reflection of current economics. You're not pricing what a company is. You're pricing what it could become if every assumption holds — the market scales, the model works, the team executes, the competition doesn't kill you first. In that framework, profitability almost becomes a liability. It signals you've optimised for the present instead of for scale. And scale is what the scoreboard rewards. Where the Logic Still Holds — and Where It Breaks To be fair to the model: Stripe understood this logic. So did Starlink. Both burned capital in service of a genuinely defensible, winner-take-all position — global payments infrastructure and low-earth-orbit satellite connectivity respectively. The thesis held because the preconditions were real: the markets were enormous, the moats were structural, and first-mover ownership was worth the losses. But most businesses — and most African businesses in particular — don't have those preconditions. Their growth is gradual by nature, not by failure. Their value is operational, trust-dependent, and relationship-driven. Their moats are built slowly, through consistency and community, not through spending to acquire before a competitor does. When you force a VC clock onto that kind of company, you don't accelerate it. You break it. You force premature geographic expansion before the core market is earned. You push unit economics that the business model can't yet support. You reward storytelling over operational depth. The Paradox at the Heart of Africa's Unicorn Story Twelve years ago, Africa had no billion-dollar startups. Today it has nine or ten. That is not a failure story — and it's important to say so plainly against the doomer narrative that's been circulating. But look carefully at what those companies actually require to fulfil their own theses. The most credible ones — in payments, logistics, and healthcare infrastructure — need regulatory trust, cross-border stability, institutional adoption, and deep distribution. In other words, their actual path to justifying those valuations looks patient, compounding, and operationally-led. The instrument and the reality are in friction — even at the top end of the ecosystem. The story being told to investors and the growth trajectory the business actually needs are not always the same clock. This is the paradox nobody wants to say aloud: some of Africa's most celebrated companies may be living proof of the very misapplication they're supposed to represent the solution to. What This Looks Like From the Inside We're building PerAnkh, a workforce infrastructure platform that turns real, demonstrated skills into trusted signals for the labour market. It is designed specifically for Africa's workforce: young, informal, skills-rich, credential-poor. The signal we're building compounds over 12–18 months. Value accrues to employers, institutions, and governments — not to individual users clicking through a course. No VC clock survives that architecture. Forcing one onto it wouldn't accelerate us — it would destroy the very thing that makes the model work. The trust layer we're building cannot be rushed. It can only be grown. That's not a flaw in the business. That's a capital-fit problem. And it's not unique to us. Across the continent, there are companies building real, durable value — quietly, patiently, in markets that require depth before they reward speed — that are invisible to the VC model not because they're weak, but because they're the wrong shape for the instrument. The Correction Is Underway — But the Gap Remains The good news is that the overcorrection is being recognised. Burn rate is no longer a badge of ambition. Investors are demanding a credible path to profitability, not just aggressive growth curves. Down rounds are being discussed openly in ways that would have been unthinkable in 2021. The LP base — the pension funds and endowments behind the funds — is asking for actual distributions, not paper markups. The model will survive. For the narrow class of businesses it was designed for, the logic still holds. What won't survive is the cultural overapplication — the pretence that every tech-enabled business is a Stripe waiting to happen. But here's the harder problem: the alternatives are too thin. Revenue-based financing. Growth equity. Development finance institutions. Patient family office capital. These instruments exist, but not at the scale, accessibility, or cultural visibility that Africa's builders need. "Patient capital" is only a solution if it actually exists and can be found. The Question Worth Asking The conversation about African tech has been stuck on "is VC broken?" for too long. The more useful question is: what fills the space VC was never meant to occupy? That requires ecosystem builders, development finance institutions, family offices, and governments to build the infrastructure of alternative capital — not just advocate for it. It requires founders to resist the pull of the only door that seems open, even when the cheque on the other side doesn't fit the business they're actually building. And it requires all of us to stop measuring every business by a scoreboard that was built for a different game. Rollins Orlu is the founder of PerAnkh LIMITED (Nigeria) and Chief Executive Officer of Darrel Technologies Ltd (Ghana). This post is part of an ongoing series on capital, infrastructure, and building in African markets.
