TheVenture Capital in Africa Report suggests theAfrican market is increasingly funding itself—out of necessity, but also out of confidence. West Africa retained its status as the continent’s most active region.
“Local investors leading fundraising rounds is a trend that’s likely to persist.”
For the first time in modern venture capital history on the continent, African investors have emerged as the single largest group of active participants in the ecosystem—accounting for 31% of the total investor pool in 2024, according to the latest Venture Capital in Africa Report by the African Private Capital Association (AVCA).
This marks a leap from 19% a decade ago and signals a growing shift in who is backing African innovation.
The finding, released in the sixth edition of AVCA’s annual report, underscores a defining moment in Africa’s startup funding landscape: a surge in domestic capital formation, even as overall investor participation declined by 21% from the previous year.
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In total, 614 investors were active across the continent in 2024—a downturn reflecting broader global macroeconomic pressures but also a unique regional resilience.
AVCA’s data shows that Africa experienced its venture capital correction later than other global markets. While venture markets globally bottomed out in 2023, Africa hit its funding low in the first half of 2024. The lag was attributed to the region’s delayed exposure to inflation, supply chain disruptions, and geopolitical shocks that impacted capital flows worldwide.
Deal activity suffered accordingly. African startups saw a 22% year-over-year (YoY) decline in deal value and a 28% drop in deal volume, sharper than global averages where deal value grew by 6% and volume fell by 24%. Despite these contractions, the report notes signs of underlying strength: venture debt lenders, though representing just 12% of all deal volume, contributed a remarkable 37% of total deal value, showing alternative funding models gaining traction.
Yet, a modest 3% YoY increase in both deal value and volume in the second half of 2024 suggests that the continent’s investor appetite remains intact.
Experts say the increase in African investor participation is not merely symbolic—it reflects a fundamental shift in how capital is being mobilized and deployed.
“The trend of increased local investor participation in African venture capital is likely to continue for several reasons,” Dotun Olowoporoku, Managing Partner at Ventures Platform, says to FORBES AFRICA. “From the growing sophistication of local capital to evolving regulations enabling pension funds to allocate to VC, the conditions are maturing.”
According to Olowoporoku, the rise in participation is driven by institutional evolution, economic necessity and ecosystem maturity. “Success stories like Paystack and Moniepoint have proven the viability of African tech investments.’’
Still, challenges remain. African VC funds are typically smaller in size, which limits their capacity to write larger checks or participate in later-stage rounds. In some markets, regulatory constraints continue to restrict institutional investors like pension funds from fully participating. And currency depreciation, particularly in markets like Nigeria, poses a risk to returns—especially for investors measuring performance in dollars.
Yet, this local involvement is beginning to influence where and how money flows.
“Local investors typically have deeper insights into market dynamics, regulatory environments, and consumer behavior,” Olowoporoku says. “We’re seeing a greater focus on startups solving real, immediate problems—painkillers, not vitamins.”
West Africa retained its status as the continent’s most active region, accounting for 23% of total deal volume, with Nigeria alone responsible for 16%. The so-called “Big Four” markets—Nigeria, Egypt, Kenya, and South Africa—continued to dominate, representing 55% of total deal volume and 64% of deal value.
Fintech remained the top-funded sector, with 116 deals raising $1.4 billion (or 34% of all tech-enabled rounds). However, other sectors are beginning to emerge. Clean & ClimateTech accounted for 13% of tech-enabled deals in 2024—up from a five-year average of 7%. For the first time, AI broke into the top four verticals, with 42 deals raising $108 million.
“AI and greentech are growing trends,” Chiebuka Obumselu of Fund Operations at Innovate Africa Fund, tells FORBES AFRICA. “Each cycle, investors are building stronger pipelines and better due diligence frameworks. I believe we’ll see more capital deployed to early-stage companies across a wider range of sectors.”
Despite economic headwinds, fundraising remained robust. In 2024 alone, eight VC funds closed a total of $736 million, representing a 41% YoY increase. Since 2015, 35 fund managers have raised $2.7 billion across 41 funds, translating to a compound annual growth rate (CAGR) of 25%.
The exit environment is also gradually strengthening. From 2019 to 2024, Africa recorded 138 exits, indicating growing opportunities for returns, even though the number remained flat in 2024 with 26 exits. Trade sales accounted for 84% of those exits, with an average holding period of 3.8 years.
“Local investors leading fundraising rounds is a trend that’s likely to persist,” Obumselu says. “And the more players in the market, the more capital there will be for follow-on rounds.”
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