The price of growth: What African founders must know about private equity
Growth. Every founder I’ve met, from Lagos to Nairobi, talks about it with the same intensity. Growth turns small ideas into global success stories. It’s the heartbeat of entrepreneurship. But behind every leap in scale lies a financial engine that fuels it. In Africa’s startup and mid-market ecosystem, that engine increasingly goes by one name: private equity.
Early in my journey as an entrepreneur, I thought private equity (PE) was a miracle that came at no cost, a golden ticket to scale and success. I was wrong. The more I’ve seen, the clearer it’s become that PE is not free money; it’s a structured partnership with real trade-offs. And if you don’t understand those trade-offs before you sign, you may end up funding your own loss of control.
So what exactly is private equity? In its simplest form, PE pools funds from investors, institutions, pension funds, or high-net-worth individuals, to acquire stakes in established private companies. The goal is to grow the company, optimise performance, and sell that stake at a significant profit. Unlike venture capital (VC), which bets on early-stage startups, PE prefers businesses that already have a proven model and stable cash flow.
When it works, PE can be transformative. It injects capital, introduces governance discipline, and opens access to new markets. For African founders, its most immediate benefit is liquidity, the opportunity to turn sweat equity into financial reward. In economies where access to credit remains painfully limited, PE can be a bridge between potential and prosperity.
But every bridge has a toll gate. Once you take PE money, you give up a degree of autonomy you may never regain. Decisions that once sprang from your intuition and values now pass through spreadsheets and board approvals. Culture, the invisible force that binds your team, can shift overnight as financial discipline replaces founder flexibility.
It’s not necessarily malicious; it’s structural. PE investors are mandated to deliver returns to their own backers within a set timeline, often five to seven years. That clock starts ticking the day they invest in you. Growth targets, cost cuts, and eventual exits are baked into their model. If you’re not mentally or structurally ready, your company can begin to feel alien, profitable on paper but hollow in spirit.
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We’ve seen versions of this across the continent, from HealthPlus in Nigeria to iProcure in Kenya, where disputes over control, governance, or direction emerged after investment. These cases remind us that capital can either strengthen or suffocate a vision, depending on the terms agreed.
My advice to African founders is simple but urgent: bootstrap first, and know your “BizNup”.
Think of private equity like marriage. You don’t marry someone just because they look good on paper; you do so because you share values, vision, and endurance. Bootstrapping, building with your own resources and networks, is the equivalent of personal growth before marriage. It teaches resilience, resourcefulness, and clarity of purpose.
When you finally consider investors, you must draft your “BizNup”, a business pre-nuptial agreement. It doesn’t have to be literal, but it should define your non-negotiables: your culture, your leadership principles, and your long-term mission. It’s about protecting what money can’t buy, your purpose.
Look at Tobi Lütke of Shopify. Even after accepting investor money, he structured his company’s governance to preserve its unique culture. That’s a BizNup in action: clarity, conviction, and control.
In markets like Nigeria, where inflation is high and credit is expensive, PE funding can appear irresistible. Yet founders must remember that not all capital is compatible with their stage or purpose. Smart money builds; fast money binds.
To thrive, African entrepreneurs must master both sides of the growth equation, the art of bootstrapping and the science of structured capital. Learn to build lean before scaling wide. When PE eventually arrives, let it amplify what you’ve built, not replace it.
Private equity is neither saviour nor villain. It is a sophisticated tool, and like any tool, its impact depends on the skill and discipline of the user. For founders, the ultimate measure of success is not the size of the exit but the integrity of the dream that survives after the deal is done.
In the end, sustainable growth is not about valuation; it’s about value. True wealth is when your company scales without losing its soul: when your dream still belongs to you, even after everyone has been paid.
Dapo Abiola is a seasoned entrepreneur and strategic leader with over a decade of practical experience driving ventures across the private and public sectors.
