2024 was a year of resilience for Africa’s VC ecosystem, with capital-efficient businesses continuing to attract funding amid a tough macro environment. While Western VCs largely remained on the sidelines, the African market showed signs of stabilizing, setting the stage for a cautious but promising 2025. As we press ahead into the year, our team shares insights on emerging investment themes, the evolving fundraising landscape, the role of ESG, and what to expect from exits, macro trends, and new sources of capital.
Your predictions for 2024 were that Western VCs will remain cautious towards African opportunities, funding rounds would take time and the market would continue to favour capital efficient businesses. Did these prove to be true and what do you think 2025 will have in store for the African VC and entrepreneurial ecosystem?
Steve Beck: Our 2024 predictions did prove to be true. The difficult macro-political and economic environment chastened the ecosystem, with numerous well-founded startups failing. Western VCs were largely absent from Africa deals, overall funding was flat, funding rounds took longer, and capital-efficient businesses — those evidencing sustainable growth continued to raise capital.
As we look to 2025, we are cautiously optimistic. Signs of a global VC recovery in late 2024 — though much of it driven by AI FOMO — suggest Africa’s rebound could begin later this year, following its typical 6–12-month lag. Africa’s relatively small VC market also means that a small number of individual financings have outsized impact. Success stories — whether through funding, market expansion, or exits — will drive broader confidence. New funds with an African mandate, including our own third fund, have been raised in the last two years. Investors will continue to focus on businesses with clear paths to profitable scale.
Despite the tapestry of challenges, Africa’s fundamental growth story means there is no shortage of large-scale opportunities. Companies that have weathered the recent downturn will be leaner and wiser as a result. They will have opportunities to acquire distressed assets, consolidate their position, access new markets, and grow. We are beginning to see more second-time founders who will have learned lessons only experience can teach. Meanwhile, patient investors committed to the region will continue to find exciting and transformative investment opportunities.
What are some of the investment themes and regions that you think look most promising in 2025?
Andrew Carruthers: As some of the dust settles on a few brutal years on the continent, we are looking with interest at the technologies and business model innovations that improve the productivity of a growing, urbanising and youthful population. In Agtech, this could be increasing the productivity of farms by harnessing biodigesters to produce power and organic fertilizer — as in the case of our first investment from Fund III — Sistema Bio. Or it could be through irrigation technologies to improve farm productivity and Biochar to grow soil health.
Elsewhere, we are seeing interesting productivity improvements through energy access 2.0; whether that is the improving energy storage and smart logistics powered by the emobility revolution, or through bio-ethanol as a cooking alternative, as in the case of our portfolio company Koko Networks. Underpinning many of the economic models for these trends is the improving viability of renewables, as well as the evolution of carbon markets.
These themes manifest unevenly across the continent, with electrification taking off more quickly in countries without oil or gas, such as those in East Africa, and Agtech flourishing faster in North and South Africa where the farms are bigger and access to markets, whether local or international, is more efficient. A country to watch for exciting growth is the DRC — with its dollarized economy and a history of under-investment in virtually every sector. Just don’t bet the farm quite yet.
Looking ahead at the year, how will macroeconomic conditions globally and in key African markets impact the ecosystem?
Abel Boreto: As we look ahead to 2025, the African startup and VC ecosystem is poised for significant transformation, driven by the interplay of global macroeconomic conditions and local market dynamics in key countries: Nigeria, Kenya, South Africa, and Egypt.
Despite the potential for recovery in 2025, global investors are expected to maintain a cautious stance due to ongoing uncertainties, including inflation, emerging trade barriers, and escalating geopolitical tensions. This cautious approach is likely to result in a more selective investment strategy that prioritizes resilient sectors such as fintech.
While fintech has historically dominated VC funding in Africa, the climate tech sector has grown significantly over the last two years driven by pro-climate policies and substantial drop in the prices of key components like batteries and solar panels. As a result, investors may increasingly shift their focus towards climate tech, viewing the sector as both a sustainable and lucrative opportunity in the evolving investment landscape.
How will ESG considerations shape investment strategies and business practices on the continent in 2025?
Doreen Nabaho: As ESG considerations gain traction globally, their influence on investment strategies in Africa is undeniable. Much of this is driven by the significant role Development Finance Institutions (DFIs) from developed economies play as Limited Partners (LPs) in African VC funds, setting the tone for what responsible investment looks like on the continent.
For founders, this means ESG is no longer a “nice-to-have” — it’s a cornerstone of building resilient, scalable, and investable businesses. Startups are increasingly expected to monitor, resolve, and transparently report on key ESG issues including labor practices, road safety, gender-based violence and harassment (GBVH), and more recently to disclose environmental impacts such as CO2 emissions. Emerging solutions, like user-friendly tech systems, can make the monitoring process less of a burden and more of a tool for continuous operational improvement. We’re also seeing ESG leadership evolve — dedicated ESG Managers and board-level sub-committees are emerging as companies recognize the importance of embedding these practices at every level.
By 2025, founders can expect greater ESG-related due diligence and increasing reporting requirements from investors. The best founders will see ESG not as a hurdle but as an opportunity for their companies to improve their operational processes, build trust with their stakeholders, and attract the right kind of capital.
What role will alternative sources of capital and partnership, particularly from Japan, play in advancing Africa’s entrepreneurial ecosystem this year?
Riki Yamauchi: Across various markets, especially developing economies, it is becoming increasingly critical to think about diversification of capital in the venture ecosystem. African funds, to date, have been mainly funded by DFIs, and are now on the cusp of attracting capital from corporates and strategic investors, which have very different motivations for making LP investments into VC funds.
In our latest fund, we’ve welcomed new partners including SBI, Mitsubishi, and Mitsui OSK, which have very specific interests in Africa — from E-Mobility, Financial Services, AI, to Cold-Chain solutions. What’s consistent across these investors is that making LP investment is an “entry ticket” to establishing a long-term business footprint in Africa, rather than short-term financial returns. Together, we have already been discussing ways to leverage their know-how, supply-chains, and global networks with our portfolio companies.
We hope that having a diverse mix of LPs and networks would allow us to bring a unique value proposition to bold entrepreneurs who are tackling the most difficult and complicated issues for the everyday African consumer, producer and supplier.
How do you expect the fundraising landscape for African entrepreneurs to shape up in 2025?
Sapna Shah: We’re seeing rays of sunshine piercing through the fundraising winter of 2023 and 2024! With the likes of Nigeria’s Moniepoint, South Africa’s TymeBank & East Africa’s BasiGo raising significant rounds at the end of 2024, I’m optimistic that 2025 will yield a much stronger fundraising environment for African entrepreneurs than the previous couple of years.
How did climate-tech evolve in Africa in 2024, and what are the trends that will emerge this year?
Dominic Michel: Inflation and cost of living challenges biting across Africa in 2024 mean that climate-tech solutions have been under even more pressure to ensure they are affordable for everyday consumers and producers. Fortunately, the cost of many climate technologies is reducing and we will increasing see businesses able to offer a compelling ‘green discount’ to customers. This could be game-changing for customers that are extremely price sensitive. In 2025 we expect scale to come from those businesses that are able to align the economic interests of a growing population with planet-positive technologies.
Do you expect to see more exits in 2025?
Brian Waswani Odhiambo: Yes, I expect to see more exits in 2025, but the nature and volume of these exits will depend on several key factors.
Maturing VC-backed Companies: Over the last decade, we’ve seen a wave of African startups securing early- and growth-stage funding. Many of these companies, particularly those backed in the 2017–2020 period, are now at a stage where investors will be looking for liquidity events.
Market Corrections and Valuation Realism: The past two years have forced both startups and investors to re-calibrate expectations on valuations. While IPOs may still be rare, we could see more secondary sales, acqui-hires, and strategic M&A activity as companies seek sustainable paths to scale.
Corporate and PE Interest: Large African corporates, regional players, and international private equity firms are increasingly viewing tech-driven businesses as critical for their own growth strategies. This could drive more M&A activity, especially in fintech, clean tech, and logistics.
Investor Pressure for Liquidity: With LPs expecting returns and some funds reaching the end of their investment cycles, there will be a stronger push for exits. This may accelerate secondary transactions or strategic sales even in a less-than-ideal market.
Regulatory and Macro Trends: Political stability, currency fluctuations, and economic growth across key markets like Nigeria, Kenya, Egypt, and South Africa will influence investor confidence and the feasibility of exits.
While blockbuster IPOs might not happen, 2025 is likely to bring a slight rise in secondaries, and consolidations — driven by necessity, strategy, and the maturing African startup ecosystem.
