Venture Capital Trends to Watch in Africa

Investment into African startups held up in 2025, even as funding conditions tightened. According to AVCA, more than $5 billion was invested in African startups last year, with deal activity also rising. In the tech sector, the picture was likewise resilient.

Data from Partech Africa shows startup funding rose 25% to just over $4 billion. And while global venture capital is chasing AI, Africa's market focused on businesses solving real world problems, with investors continuing to back sectors like fintech, clean tech and health tech.

I caught up with Tokunboh Ishmael, co-founder and managing director for Alethea Capital, for the view from investors on the ground. People have been looking at more fundamentally driven businesses. The age of just grow it and, you know, blitz

it with, um, throw money at it to grow it and they'll come has gone. It's how can you build more resilient growth, um, growth that is more sustainable and endures. And we have been looking at that before the, uh,

the Gulf conflict. Um, and sorry, the, the, the, the recent Ukraine war and the war in the Middle East. And we're looking at impact that's fundamentally driven, that also drives the income, which is why having the diversification from

the foreign currency volatility is also important because it's not just how do you stabilize based on, uh, geopolitical events, but how do you stabilize for your local currency. So you're looking for resilience all around. Well, you've also seen if we're looking at numbers, is

that at its height about three years ago I think the VC market was around $5 billion. Um, in that year in terms of $5 billion investment. But what you've seen is a bit of a dip in the last couple of years where that's gone down

to just under 3 million, where you're now seeing. Yes, from that 3 billion, Sorry, from that $3 billion level. It's growing, but it's growing more meaningfully and with more resilience and more fundamentally driven.

And we've also noticed in our next edition of Of Africa's 25 Startups to Watch, um, it's quite interesting that actually 26% of funding came from, uh, the US, while African investors, which speaks to your point, accounted for 45%, which may be sort of speaks to what you're saying,

maybe we are seeing a bit of a tipping or shifting of the scales. Well, there are a couple of things at play. Um, I expect that, yes, we will see an increase in the domestic base.

I also expect that we're going to see the foreign investors begin to come back, um, as they see the quality of what's being invested in and growing. On the domestic side, what you've seen in the past is that domestic funding has gone into arm chair investing

in maybe treasuries, what they call the safe haven. And they're seeing that the returns on those are not matching the returns that you can get in some of these private, um, capital investments, but also their duration asset liability matching is a little bit out of sync.

So you're seeing the balancing in the pension funds where they're thinking, okay, I need to have duration for the long term. I can take a little bit more, um, equity risk and so let me look at these new asset classes.

What you're also seeing is that with their funds, the pension funds are ballooning. Right. So we're seeing billion dollars, um, billions of dollars in the African pension landscape.

Um, the armchair products that they had in the past can no longer meet the demand for the, for pensions investments. So you're seeing that there's also a forcing element that we need to think about new products.

We can't just rely on this traditional base because our funds under management uh outstripping that.