African venture capital companies have raised just over $1bn over the first five months of the year, signalling a return to form for African capital-raising in what is turning into a vibrant market.
According to the Africa: The Big Deal substack, collated by long-time African venture capital follower Max Cuvellier Giacomelli, the $1bn raised in the first five months of 2025 compares very favourably to 2024, when $750m was raised over the same period. “What’s also encouraging is that start-ups in Africa have raised $2.5bn over the past 12 months (June 2024-May 2025), the highest total for a 12-month period since early last year,” he says.
Giacomelli, head of mobile for development for GSMA, the global trade association for mobile network operators, describes the African start-up environment as full of opportunity. “There are many untapped opportunities on the continent at the moment where additional capital could be deployed, in particular at earlier stages of the investment cycle, therefore ‘building the pipeline’ for larger later-stage investments,” he says in a mailed interview.
This is not a large amount by comparison to venture capital fundraising globally, which is massively dominated by the US. It raises about half the total global venture capital investment of somewhere between $300bn and $400bn a year. But Africa is competitive with Latin America and the Middle East, and has been creating a unicorn – an unlisted business valued at more than $1bn – regularly every year for the past decade.
The year 2022 was a landmark for African venture capital with some estimates suggesting about $4.6bn was raised, skewed somewhat by some very large ventures, including the Nigerian fin-tech Flutterwave which raised $250m that year. Since then, there has been a market contraction and pull-back, but early indications suggest that could be changing now.
Fin-tech in general has been a dominant sector in Africa for years now. Giacomelli says the share of fin-tech was decreasing in the more recent past, but it is back to attracting about half of the money invested in start-ups in Africa.
“This can be explained by at least three elements: fintechs are much more likely to raise large tickets (all but one unicorn in Africa are fintech); in many markets, fintechs are still building the financial rails for other sectors to build upon; and ‘fintech’ is now a very broad category, branching into many models.” These include business-to-consumer, business-to-business, savings, loans, buy-now-pay-later.
The two big restrictions on venture capital in Africa, says Giacomelli, are regulatory hurdles and human capital. “Regulation remains a hindrance in many markets, depending on the sector. In particular, the lack of consistency across markets makes replication to other African markets a lot harder for African ventures.”
Human capital is the absolute core of the innovation ecosystem, he says. “The history of funding in the past decade has proven that you can build successful ventures powered by African talent. However, with the competition for talent being global, Africa competes with other regions like the US or Europe for the best talent, especially on emerging topics such as AI.”
Moving online
Wale Ayeni, managing partner at private equity company Helios Digital Ventures, says he would characterise the current moment as “slowly climbing out of the slump”.
“Venture has been down for a few years globally, whether in the US or Africa. It’s a very cyclical business. I just think we are starting to get into a better environment.”
Helios’s broad strategy in Africa has been to invest in successful companies and help them scale across the continent. “And they’re all doing well, they’re all scaling, they’re all getting customers,” Ayeni says.
The difference he sees in Africa is linked to certain “overlooked demographics”, particularly in fintech and in the informal sector. Small merchants are transitioning online very, very quickly now, and companies that help them transact and move their cash businesses online are flourishing.
Another growing segment is what Ayeni calls “the global African”. There are a lot more small businesses that are interacting with the world, buying supplies from China, and ordering some parts from the US, for example. These people want to transact globally, and banks have been very bad at helping them do that.
“So creating platforms that can help them do cross-border trade, where the money originates in Africa, is also a growing area. There’s been a lot of technology around remittances, money moving from developed countries to Africa. But when it comes to this new wave of global African business or the global Africans, there has been less focus,” he says.
One disappointing thing about African venture capital is how little African investment there is in the sector. “Without local participation, all the value that we are creating as venture capital folks actually leaves the continent. A lot of venture capital would rather make money for local investors than for outside investors,” says Ayeni.
“So we have a big push where we’re trying to say, okay, where are these local investors? They didn’t participate; only offshore investors invested. Why is that? What is holding them back?
“I think the main problem is that there is just a lack of understanding, and a feeling that the asset class is too risky.”
Top image: Rawpixel / Currency collage.
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