Inside Africa

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What It Really Costs to Build a Startup in Africa This Year

October 21, 2025

What It Really Costs to Build a Startup in Africa This Year

In cafés, co-working spaces and late-night WhatsApp threads, founders are rethinking what it means to launch a startup in Africa this year.

The continent’s ecosystem is no longer just about bold dreams, it’s increasingly about hard numbers, stretching scarce capital, and calculating cost in ways that reflect unique local realities.

This article discusses the real cost of building a startup in Africa, using 2025 data and regional examples to analyse what the financial (and non-financial) aspects look like.

Let’s begin.

Why cost matters now

At first glance, one might assume Africa remains a cheap place to start a business. After all, labour costs are lower, rents may be less than New York or London, and there’s an argument to be made that “emerging market” equals “low cost.”

But that assumption breaks down quickly once you layer in operational realities: unreliable infrastructure, regulatory uncertainty, currency swings, conditional capital, and funding constraints.

In 2025, the stakes are higher. Across the continent, early-stage funding is showing signs of renewed momentum. According to one tracker, African startups raised over US $1 billion across January to May 2025, a roughly 40% year-on-year increase.

Yet at the same time, major markets such as Nigeria, Kenya, Egypt and South Africa (“Big Four”) continue to absorb the lion’s share of deal-flow, leaving many other ecosystems still under-capitalised.

For a founder in Accra, Kampala or Bamako, this translates into a very different calculus than what a Silicon Valley startup might face.

The cost of building is not simply about working capital and salaries. It’s about navigating market risk, managing regulatory friction, dealing with infrastructure gaps, and living with volatility.

So when we talk about the “real cost” of building a startup in Africa, we aren’t just talking about “how much capital do I need to raise to get to MVP.”

We’re talking about what it really takes, the hidden costs, the variable costs, the region-specific costs, and how founders are responding.

Mapping the cost of building a startup in Africa in 2025

1. Pre-launch & incorporation

Starting anything means a certain set of fixed costs. Company registration, legal fees, licensing, minimum viable infrastructure, etc.

In Nigeria for example, a broad guide lists costs for incorporating a Private Limited Company at between ₦50,000 – ₦100,000 (approx. US $60-120) for the basic registration alone.

Of course, that is only the beginning. If you’re building a regulated business, say fintech, agriculture export, or manufacturing, you will incur costs for sectoral licences, regulatory compliance, minimum capital requirements, which vary significantly by country (and sometimes by local government).

In Nigeria, for example, food & beverage licensing might cost ₦50,000 – ₦100,000, while health & safety permits might add ₦20,000 – ₦50,000.

In East Africa, the cost of registration and compliance may seem modest in international terms. Still, when you add delays, inefficiencies, local counsel, and sometimes bribes or “facilitation fees,” the effective cost rises. The same fact is rarely tracked in headline cost estimates.

In practice, you might expect that launching a “light” tech startup in a major African city might require at least US $3,000 – 10,000 just to cover incorporation, minimal legal setup, first month rent, basic hardware and early software licences.

But for heavily regulated models or physical-goods models, it could easily exceed US $20,000 before you even start generating revenue.

2. Infrastructure & operational overheads

This is where the “emerging market” cost advantage begins to fade—or invert—because of what you have to add in.

Take Lagos, Nigeria. An article noted that setting up a conventional leased office in prime business districts (Victoria Island, Lekki, Ikeja GRA) involves 1-2 years’ advance rent, plus separate contracts for high-speed internet, backup power systems (generators or UPS), security, cleaning, etc.

The article estimated that switching to a shared workspace model could save 40-60% of overhead. That’s a big saving, but it also shows that overheads are that high to begin with.

Let’s unpack some of these costs:

Office rent: Even if you start with a small team, rent in top African cities is increasingly competitive. In Nigeria alone, monthly rent in Lagos central business district can reach ₦100,000 – ₦500,000 (~US$120-600 or more depending on size).
Power & utility backup: Frequent outages mean you might need a generator or UPS. Fuel, maintenance, and noise/ventilation costs all add up.
Connectivity: Internet services, especially stable ones, tend to be pricier or less reliable than in developed markets. Downtime costs more.
Hardware and software: Laptops, servers, cloud services, often imported, hence exposed to currency risk and import duties.
Personnel overhead: Even though wages might be lower than in say New York, competition for tech talent is increasing, meaning salaries are creeping up. Also, benefits, perks, remote allowances all add up.

All of these combined mean that the “cost advantage” in Africa is less about being cheap and more about being lean and disciplined.

3. Product build, testing and go-to-market

Once the infrastructure is in place, the next big cost bucket is building the product, launching it, acquiring initial customers.

Here the cost varies dramatically depending on business model. For a SaaS startup it’ll be different from an agritech enterprise deploying IoT sensors or a manufacturing startup building hardware.

Some typical cost drivers:

Engineering / development: Hiring local or remote developers, paying for licences, design, QA. In Africa, while labour costs may be lower than in Western markets, you still face the same product-market fit risks, bug fixes, iterations.
Cloud/servers: Many African startups rely on global cloud providers (AWS, Google, Azure). Currency fluctuations and bandwidth costs mean this can be a larger percentage of budget than you might expect.
Market testing and regulatory approvals: If you’re in fintech or healthtech, you may need permissions, pilots with governments or large corporates, all of which take time and money.
Customer acquisition: Digital marketing, on-ground field staff (especially if your market is offline), partnerships. Africa’s fragmentation (languages, payment systems, infrastructure) means go-to-market often requires local presence and investment.
Iteration and burnout: Products may take longer to find fit. That means more months of runway required.

From the funding data: In Africa, average seed rounds in 2024 were around USD $1.6 million. Series A rounds averaged about USD $6.7 million.

These are not the cost of building, but they give a sense of scale of what investors expect.

If you’re going to raise USD $1.6 million at seed, to build and grow, you better be prepared for months of spending and growth before that raise.

4. Risk, resilience and hidden costs

This is the interesting bit, costs you might not budget upfront, but that shape the runway and outcomes.

Currency and inflation risk: In many African countries, the local currency depreciates, and inflation is high. If your plan assumes local salary costs but your revenue or capital is in USD, you may benefit, but if you raise capital in local currency or revenue is local and costs are USD-linked, you’re exposed.
Infrastructure downtime & reliability: Imagine that your server goes down due to a power outage. Restarting it, paying for fuel, delays, and lost transactions all cost unbudgeted dollars.
Regulatory or policy shifts: A license may cost X now; next year it may cost 10×. Or new rules may require local data centres, new taxes, import restrictions.
Talent churn: If your best developer quits for greener pay overseas, replacing them costs more than salary differences, it costs delay.
Time to scale: Because many African markets are fragmented, scaling often means entering multiple countries. That means new legal entities, local teams, third-party partnerships, and all costs.
Opportunity cost of capital: If your burn is high, you may face fundraising pressure early, meaning you accept less favourable terms or lose equity. That ultimately increases the ‘true cost’ of building.

For example, in Nigeria, the overheads of securing a proper office, connectivity and power backup are extremely non-trivial.

According to an article by Office Phase: “Office rents in Lagos rank among the top 5 most expensive in Africa … power outages force businesses to rely on costly diesel generators.”

A look into three cities

Let’s zoom into three cities/ecosystems and show how cost plays out on the ground.

Lagos, Nigeria

In Lagos, you’re playing in one of Africa’s largest startup markets. Access to talent, large consumer base, fintech early-movers.

Funding flows too: Nigeria accounted for $540 million in funding across 80+ deals in 2025 to date.

But the cost side is fierce. Renting an office in the central district might run you ₦100,000–₦500,000 monthly (or more, depending on size) just for the space.

Add to that the need for backup power, reliable internet, and higher salary expectations for tech talent from Lagos’ competitive market.

Imagine a fintech startup with a team of 10. If each local staff costs say ₦500,000 a month, inclusive of benefits (this is illustrative), rent and utilities run another ₦300,000 monthly, and development/cloud costs add up, your monthly burn could easily cross US$10,000-15,000 (or more) before you even scale.

Now factor in market risk: Getting regulatory clearance, payment integration, local customer acquisition.

If your runway is 12 months and you haven’t achieved market traction, you may start feeling pressure. The question then isn’t “how cheap is Lagos” but “can you build efficiently and de-risk fast”.

Shared workspace models help: For example, a Lagos shared office operator claims savings of 40-60% compared to traditional leases for startups.

So the smart founder will consider a lean setup, remote first for early months, minimal overhead, and keep capital focused on product and market validation.

Nairobi, Kenya

In Nairobi you also have a vibrant ecosystem, regional access to East Africa, a thriving tech community.

The “cost of building” story is slightly different: rents may be lower than Lagos for certain locations; talent availability is improving; Kenyan regulatory environments (for tech) are relatively well understood.

But you face similar cost profiles for product development, scaling across regions, and go-to-market complexity.

If you’re building for East Africa, you’re still dealing with cross-border fragmentation (payments, logistics, regulatory). So your cost model needs to assume “multi-market” earlier than many Western startups might.

Also, physical infrastructure costs add up. If you’re building hardware/IoT, shipping to Kenya, dealing with import duties, customs delays, those all erode the budget.

So while the cost base may be “friendlier,” the complexity of scaling still demands serious runway.

From the data: in 2024, Kenya and East Africa contributed significantly to regional funding, but the average ticket size remains lower than the “Big Four” major markets.

Hence, startups often operate with tighter budgets. That means the cost of mistakes or delayed product-market fit is proportionately larger.

Cairo, Egypt

Egypt is interesting because it occupies a kind of bridge status: North Africa + Middle East. In early 2025, Egypt’s startup ecosystem accounted for 31% of funding for African startups in Jan – May 2025 (US$330 million+).

But the cost dynamics again differ. Living costs for talent may be lower in some cases, but you may face more bureaucracy (depending on sector), regional political risk, currency fluctuation (Egyptian pound), and sometimes higher import tariffs.

For a founder launching a proptech (as was the case for one big Egyptian deal) you might expect more upfront infrastructure cost (physical real-estate partnerships, hardware, land, marketing).

Going regional adds complexity. So while the cost of “launching” may look competitive, the scaling cost may escalate.

Egypt has become a “lead market” for funding, competition for talent and costs may rise. So founder benchmarking must consider cost escalation, not just base cases.

What you should budget (this year’s guide)

Putting all the above together … what’s a rough budget for a startup built in Africa in 2025? Here’s a very approximate guideline, take it with a grain of salt (because every model, market and team differs).

The key is to think in ranges and scenarios.

Lean tech startup

Minimal physical infrastructure, small team, and initial market test

Assumptions: team of 5-8 people, product MVP online, market in one country, minimal physical overhead.
Estimated 12-month budget: US$60,000 – 150,000.
Breakdown might include:

salaries: US$30 – 70k
product/dev: US$15 – 40k
infrastructure/hosting: US$5-15k
marketing/customer acquisition: US$5 – 20k
rent/office maybe: US$5 – 15k (if required)
misc/regulatory: US$5 – 10k

Mid-range startup

Larger team, physical presence, maybe hardware, and regional market.

Assumptions: team of 10 – 15 people, physical office, infrastructure, perhaps hardware or offline component, market in 2 – 3 countries.
Estimated 12-month budget: US$200,000 – 500,000.
Costs escalate: more people, higher salaries, rent + utilities, hardware import, cross-border team, marketing across countries, regulatory overhead in multiple jurisdictions.

Ambitious or heavy-asset startup

Manufacturing, agritech with equipment, physical supply chain, and market cover across Africa.

Assumptions: team of 20+, local operations in multiple countries, significant hardware or physical assets, supply chain, logistics, export, and regulatory import.
Estimated 12-month budget: US$500,000 + to US$1 million + before major scaling.
Here, costs escalate further: real-estate leases or warehouses, heavy equipment, shipping, customs, compliance, larger team, training, local partnerships, and slower revenue onset.

These budgets are not the “raise-first” numbers of what investors might commit, but rather what a founder might expect to burn if they want to reach meaningful traction.

The actual raise will often include a buffer to cover unforeseen costs (and African founders know there will be unforeseen costs).

Why cost alone isn’t enough (3 strategic cost levers to watch)

If you take away only one thing from this analysis it should be: cost matters, but so does how you manage cost and where you allocate it.

Here are 3 levers Africa-specific founders should monitor.

A. Lean and localised operations

One of the mistakes some founders make is importing cost models from Silicon Valley, expecting expensive offices, global talent, and big marketing budgets. For many African startups, the smarter path is building with what you have: remote teams, lean overhead, shared workspaces, and cost-effective tools. As one shared office operator in Lagos notes, switching to coworking can save 40-60% of overhead.

B. Capital discipline and runway buffer

Because African markets are unpredictable, and because fundraising is uneven (capital flows may tighten, geopolitical risk increases, currency risk looms), founders need to build runway buffers. If you estimate cost for 12 months, aim for 18 – 24 months if possible. Plan for cost overruns, delays, slower revenue.

C. Strategic allocation: product + market over glamour

Cost should always serve the product-market fit and growth, not vanity. It’s better to spend on first paying customers than on fancy offices. In Africa, where some infrastructure may delay rollout, the lean founders invest early and heavily in customer acquisition, refining product, learning the market, even if that means slower growth but a more resilient model.

Broader cost and funding picture in Africa this year

The fundraising data tells us a few stories relevant for cost-conscious founders.

As mentioned earlier, African startups raised $1.055 billion in Jan – May 2025 (40% up year-on-year) with 84% of that going to Nigeria, Kenya, Egypt and South Africa.
For 2024 the total equity + debt is estimated around US $3.2 billion.
Average seed rounds (US$1.6 million) and Series A (US$6.7 million) in 2024 give a sense of how much capital is being deployed.

What this means for cost: If you’re targeting seed-level investment (US$1.6 million), then your budget model must match the expectation of how far that amount will go, not just build MVP but achieve key milestones (product-market fit, initial customer revenue, brand proof) that justify Series A.

Also, note there is geographic concentration of funding. If you’re in a smaller African market or non-“Big Four” country, you may face higher cost of raising funds (or less access) which means you need to be even more efficient.

Another cost dimension: because funding is uneven, you may need to bootstrap longer, raise smaller rounds, or rely on revenue-led growth. That raises the importance of cost control. The cost of failure is high.

What investors and ecosystem builders should keep in mind

If you’re on the funding side or ecosystem building side, understanding cost is equally important—not just what founders need to raise, but when and how.

Realistic burn rates matter: Too many pitch decks in Africa still assume minimal cost and rapid growth. Investors should push for realistic budgets that account for infrastructure, market risk, overhead, buffer.
Tailored runway: Because cost models vary by city and sector, one size doesn’t fit all. Accelerators and funds should help founders build cost models specific to their region and business model.
Supporting cost reduction: Shared infrastructure (cloud credits, co-working spaces, legal templates, regulatory navigation) can help reduce cost. Ecosystem builders should emphasise lowering overhead for early stage.
Valuing lean exit or break-even models: Given the cost of scale and the cost of risk in African markets, success may look different (smaller scale, profitable earlier) than what Western VCs are used to. Cost modelling must reflect that.

Reflecting on the cost-opportunity trade-off

At the end of the day, building a startup in Africa in 2025 involves balancing cost and opportunity.

The opportunity is huge: large underserved markets, accelerating digital adoption, leapfrog potential, growth of mobile, and increasing investor interest. The cost, however, is real and often underestimated.

When I talk to founders who are succeeding, what stands out is this: they treat cost not as an afterthought, but as a strategic dimension of product-market fit.

They recognise that in Africa the cost of getting it wrong might not just be slower growth, but running out of runway, losing investor confidence, or being forced into unsustainable terms.

Yes, you can start smaller in Africa than you perhaps could in San Francisco, but the “cheaper” path doesn’t automatically mean “easy.” You still need to match cost to market, build resilience, and design for local realities.

Conclusion

So what should you remember if you’re thinking of building a startup in Africa (or supporting one)? Here are some takeaways, less about prescriptive bullet points and more about mindset.

Expect to burn. Whether you’re doing a lean MVP or a regional rollout, build for 12-18 months, assume cost overruns, and build buffer.
Focus on cost structure early. Rent, power, connectivity, dev talent, and compliance will eat your budget if you don’t plan for them.
Be regional-aware. Costs vary by city and country; benchmark locally, don’t assume you can lift models from other markets without adjustment.
Allocate for learning & iteration. It’s likely you’ll pivot, you’ll test, you’ll delay. That costs money.
Investors and ecosystem partners must recognise the cost realities. Too often the “raise-first” mindset assumes low cost; reality says otherwise.

In many ways, the “real cost” of building a startup in Africa is less about the dollar amount and more about how you control, respond to, and anticipate cost in a dynamic environment.

If you do that well, you don’t just survive, you build something durable, something that can scale.

And if you’re reading this, thinking of launching: good. The ecosystem is rich with possibilities. But know this: it’s not a runway of low expectations, it’s a runway of high execution.

Cost is one piece of the puzzle; your product, your team, and your market-fit are the others.

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