Inside Africa's venture capital reset

Africa's venture capital market continued its steady recovery through the third quarter of 2025, showing encouraging resilience despite persistent global and domestic headwinds. The latest AVCA Q3 2025 Venture Capital Activity Report indicates that investor appetite is gradually returning, particularly at the early stages, even as late-stage funding remains constrained. Together, the findings point to an ecosystem that is beginning to normalise after a turbulent two-year period.

Early-stage momentum strengthens

Africa recorded 122 venture capital deals in the third quarter of the year, representing a 17% increase compared with the same period in 2024 and marking a third consecutive quarter of steady deal flow. Although overall activity remains below the peak levels seen between 2022 and 2024, the market is clearly stabilising.

A total of 362 deals were completed in the first nine months of 2025, which is broadly in line with activity recorded in 2023 and 2024. Disclosed deal value fell sharply to US$0.2bn, compared with the US$0.6bn reported in each of the first two quarters of the year. A rising share of transactions, however, are now being completed without public disclosure, suggesting that headline figures may underrepresent the true volume of capital deployed. The data indicates that while investors are returning, they remain cautious about deal sizes and increasingly selective in the information they release.

Seed and early-stage funding lead the recovery

One of the defining features of 2025 has been the surge in seed-stage investment, which has become the backbone of the market's recovery. By the end of the third quarter, 107 seed deals had been recorded, almost matching the total number completed during the whole of 2024. Investors are showing a clear preference for smaller, experimentation-friendly commitments that allow them to back promising founders while managing risk.

Early-stage investment has also strengthened. Forty-three early-stage deals have been closed so far this year, with disclosed equity investment rising to US$0.6bn, a threefold increase. Notable Series A rounds included those raised by Kredete in financial technology, Intella in artificial intelligence and data, and Chowdeck in food technology. Late-stage activity, by contrast, remains subdued, with only two such transactions recorded in the third quarter. This mirrors global venture trends, where large follow-on rounds remain scarce and growth-stage investors continue to exercise caution.

Southern Africa rises as West Africa maintains lead in deal flow

The geography of African venture investment is also evolving, creating a more balanced regional landscape. Southern Africa has moved to the forefront in terms of total investment value, supported by an improvement in South Africa's economic climate and renewed investor interest. West Africa continues to lead in deal count, driven largely by Nigeria's dynamic early-stage ecosystem. North Africa has expanded its share of both transactions and capital deployed, with Egypt and Morocco emerging as important centres of innovation.

A market diversifying beyond fintech

For the first time in several years, financial services is no longer the dominant sector by value. Investment is broadening into information technology, industrials, consumer staples, and energy and utilities. This shift reflects rising interest in the essential, impact-driven innovations that are transforming areas such as supply chains, food systems, energy access, logistics, and AI-enabled productivity.

Venture debt reaches new heights

With equity capital remaining difficult to secure, a growing number of startups are turning to venture debt as an alternative source of financing. A total of 55 venture debt transactions were recorded during the first nine months of 2025, with the value of these deals reaching US$1.6bn. This is more than double the figure for the whole of 2024. The surge suggests that lenders have increasing confidence in the region's high-growth companies and that Africa's financial markets are maturing.

A new normal for African venture capital

Overall, the data indicates that Africa's venture capital ecosystem is entering a more stable and disciplined phase. While the era of mega-rounds and rapid valuations has slowed, investors continue to support mission-driven startups that address real-world challenges across the continent.

Looking ahead to 2026, seed and early-stage activity is expected to remain strong, regional diversification is likely to continue, and demand for venture debt is set to grow further. A gradual return of growth-stage capital is anticipated as macroeconomic conditions improve.

Africa's startup ecosystem continues to demonstrate resilience in the face of uncertainty, and investors are adapting to the continent's unique opportunities with renewed clarity and discipline.