In light of rising inflation and currency devaluation in Africa, many startups that raised funds in foreign currencies are facing challenges when reporting revenues to investors. This has led to the question of whether startups should consider fundraising in local currencies to mitigate these effects. The African startup ecosystem, which experienced exponential growth in funding over the past decade, is currently facing a slowdown in venture capital investment, exacerbated by inflation and currency devaluation.

Startup revenue reporting is impacted as many African startups often report in dollar terms, resulting in dwindling revenues due to currency devaluation even as their businesses grow. Some suggest that raising funds in local currencies could help address this issue, making it easier for startups to return investments to local investors and potentially reflecting their actual progress.

While startups often seek dollar-backed investments due to cost considerations and limited local capital availability, raising in dollars also exposes them to a global pool of investors and exit opportunities. However, the lack of significant local capital and the immaturity of the local venture capital industry make it challenging to raise funds in local currencies. Education of local investors and creating incentives for local investments are seen as potential ways to strengthen the local investment scene.

The decision to raise funds in local currencies versus foreign currencies has implications for startups' ability to withstand external shocks and plan for the long term. While the current funding environment is challenging, local investments could provide stability if capacity for later-stage deals and investor education can be improved.

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