Top Drivers of VC Investments in Africa in 2025 – CEO, AVCA

Africa’s venture capital (VC) landscape faced significant challenges in 2024, as highlighted by the African Private Capital Association’s report, which recorded only US$507 million raised across 108 deals in Q3 2024. This marks a notable decline in both deal volume and value compared to the previous year. While the VC ecosystem has experienced headwinds, factors like technological innovation, favourable demographics, and advancing regulatory frameworks continue to provide a foundation for long-term growth. Progressive developments deepening Africa’s capital markets and the policy environment, such as Ethiopia’s securities exchange and Kenya’s green energy tax incentives, are enabling startups to attract capital, expand, and scale.

In 2025, the investment landscape is poised for recovery, with trends such as the resurgence of tech investments, crypto-based funding, the rise of venture debt, the untapped potential of Francophone West Africa, and policy reforms in the energy sector expected to usher increased capital flows to climate-technologies.

Digital Financial Services and Emerging Tech Fueling VC Recovery
Africa’s tech ecosystem faced significant hurdles in 2024, with startups raising $0.3 billion in Q2, contributing to a half-year total of $0.7 billion. This represents just 35% of the $2.1 billion raised in H1 2023 and a mere 20% of the venture capital seen by mid-2022, according to the AVCA Venture Capital in Africa Report. The sharp funding decline mirrored broader global trends, but signs of recovery emerged in the latter half of the year.

Notable investment rounds in digital financial services companies, including NALA, Paymob, and Moniepoint, highlight investor confidence in the financial services sector, reinforcing FinTech and digital banking as the dominant verticals for VC funding. This trend signals that financial services remain a cornerstone of Africa’s tech ecosystem, serving as a critical driver of recovery. However, other verticals are also gaining traction. AI and CleanTech accounted for 13% of tech-enabled startup funding in 2024, reflecting a shift towards sustainable and scalable business models.

The combination of cornerstone verticals (FinTech, digital banking) and emerging sectors (AI, CleanTech, ClimateTech) reflects the evolution and growing diversity of Africa’s tech ecosystem. This breadth of investible opportunities strengthens Africa’s positioning for increased capital inflows in 2025, making it a more dynamic and resilient investment destination.

Crypto-heavy VC funding in 2025: Africa’s opportunity to lead
Global crypto-VC funding is projected to exceed $18 billion in 2025, driven by advancements in blockchain and Web3 technologies. Africa, with its position as a global leader in grassroots crypto adoption, is poised to capitalise on this momentum and emerge as a critical player in the sector’s evolution.

Between 2020 and 2022, Africa recorded a 1200% surge in crypto adoption, with Nigeria, Kenya, and South Africa leading the charge. For economies where remittances form a significant part of GDP, decentralised finance (DeFi) and digital identity systems offer transformative solutions to financial inclusion challenges, bypassing traditional banking systems. The continent’s young, tech-savvy population and its adaptability to digital-first innovations create an ideal environment for crypto-based advancements.

The regulatory landscape is also evolving. Nigeria’s pilot launch of a central bank digital currency (CBDC) and South Africa’s introduction of crypto travel rules in 2025 demonstrate progress towards integrating digital assets into formal financial systems. Notable funding milestones, such as BitPesa raising $10 million in late 2024, underscore increasing investor confidence. With regulatory frameworks that enable investment, Africa could become a hub for crypto-driven VC investments and financial transformation in 2025.

Francophone West Africa is becoming an investment frontier
The WAEMU region is rapidly gaining prominence as a venture capital (VC) hotspot. Between 2012 and the first half of 2024, Francophone West Africa attracted US$4.8bn across 356 private capital deals, underscoring its potential. Historically overlooked by powerhouse economies such as Egypt, Kenya and Nigeria, francophone markets are now becoming more attractive investment destinations.Driving this growth is FinTech and digital infrastructure. Regional integration under the WAEMU and African Continental Free Trade Area (AfCFTA) has bolstered cross-border opportunities, while sectors such as Financial Services, Materials and Industrials industries are expanding. Notable startups like Jualya and Djamo also reflect the region’s dynamic entrepreneurial landscape, signifying that Francophone West Africa is poised for further growth in 2025, solidifying its status as a rising hub for VC investment in Africa.

Venture debt as a strategic cushion amidst market uncertainty
Venture debt is emerging as a significant funding mechanism and could gain momentum in 2025 as startups seek alternative financing options. The AVCA report highlights that $755 million in venture debt was raised across 40 deals by Q3 2024, with median deal sizes rising to $9.5 million. This trend reflects a growing interest in venture debt as an alternative to equity financing, particularly for mature startups addressing operational needs or scaling across borders. As Africa’s VC ecosystem matures, venture debt could play a pivotal role in providing liquidity and fostering sustainable growth for startups in the coming year.

Policy initiatives to accelerate venture capital investment in Africa
African governments are increasingly implementing targeted policies to strengthen the VC ecosystem, recognising its role in fostering innovation, job creation, and economic growth.

In Ethiopia, the launch of the country’s first securities exchange marks a significant step towards capital market development. For VC investors, this move could provide a critical local exit avenue through initial public offerings (IPOs), addressing one of the biggest challenges in Africa’s startup ecosystem—limited liquidity and exit options.

Kenya, a hub for climate-focused startups such as Nithio (climate fintech), Ecobodaa (e-mobility), and Sanergy (circular economy), has introduced tax incentives to attract private sector investment into green energy and technology. By lowering barriers for investors in CleanTech and ClimateTech, these fiscal incentives create a more enabling environment for startups to scale and secure funding.

Rwanda’s National Strategy for Transformation, which streamlines investment procedures and improves ease of doing business, directly benefits the VC landscape by reducing administrative bottlenecks for startups and investors. Meanwhile, the African Continental Free Trade Area (AfCFTA) continues to be a game-changer, expanding market access and reducing trade barriers, making it easier for VC-backed companies to scale across borders and attract international investors.

As these policy shifts take effect, they are expected to accelerate Africa’s venture capital growth by enhancing exit opportunities, strengthening investment incentives, and improving the overall business environment for startups in 2025 and beyond. 

Abi Mustapha-Maduakor, Chief Executive Officer, AVCA – African Private Capital Association.
Abi is an ecosystem builder committed to the sustainable economic development of emerging markets through public policy and private investment. She is currently CEO of the African Private Equity and Venture Capital Association (AVCA), where she oversees strategy, partnerships, and innovation towards building a sustainable private capital industry in Africa.
Abi’s career spans financial management and structuring, international trade, and investment policy in Europe and Africa.