Africa VC Fundraising Hits Four-Year Low
Venture capital fundraising in Africa has fallen to its lowest point in four years. The decline is partly attributed to development finance institutions (DFIs) scaling back their investments. The trend underscores a growing need for capital efficiency and self-sustaining growth models for startups in emerging markets.
- Total venture capital funding for African startups fell by 46% in 2023 to $3.5 billion, a significant drop from the $6.5 billion raised in 2022. The number of active investors in the ecosystem also decreased by 50%. - The retreat of Development Finance Institutions (DFIs) is partly driven by a strategic shift in Europe towards climate finance and energy transition investments, which has tightened the availability of capital for higher-risk venture exposure in emerging markets. - Historically, DFIs anchored a significant portion of African venture funds, accounting for about 45% of commitments between 2022 and 2024; this share dropped to 27% in 2025. However, African DFIs are increasing their share of this capital, contributing 63% of the DFI funds deployed in 2025, a reversal of the previous dominance by international DFIs. - As international DFI and VC funding has become more scarce, local investors have stepped up. In 2024, African investors for the first time became the single largest group of active VC participants on the continent, accounting for 31% of the total. - Startups are increasingly turning to venture debt as an alternative to equity financing. Debt's share of total funding grew from 16% in 2022 to 38% in 2023. By the third quarter of 2025, venture debt financing had reached a total of $1.5 billion for the year. - While the "Big Four" markets—Nigeria, Egypt, Kenya, and South Africa—continue to attract the majority of funding, their dynamics are changing. West Africa has led in deal volume for three consecutive years, driven by Nigeria, but Kenya attracted the most funding in 2025, reaching nearly $1 billion. - The funding decline has disproportionately affected growth-stage companies, which saw the largest drop in average ticket size in 2023. Mid-stage companies also faced increased pressure, while median deal sizes for both seed and late-stage rounds grew in 2024. - Despite the downturn, large deals are still happening for established companies in high-growth sectors. For instance, Egyptian fintech MNT-Halan raised $400 million and Kenyan asset financing platform M-KOPA secured over $250 million in 2023.
