Local capital sparks Africa’s startup funding comeback

Africa’s startup ecosystem is emerging from two difficult years with renewed momentum, buoyed by a funding rebound that is increasingly being driven by local venture capital.

Data shared during the AfricArena Grand Summit in December 2025 showed that startup funding on the continent was on track to reach about US$3 billion in 2025, up from US$2.2 billion in 2024, marking a recovery from the slowdown of 2023.

While global capital flows remain influential, ecosystem leaders said the structure of funding and who is deploying it is shifting in favour of local fundraising.

During a State of Tech in Africa 2025 presentation, Catalyst Fund’s Maxime Bayen pointed to the growing depth of Africa-focused funds, particularly at the early growth stages.

“If we look at the 27 VC funds that have closed or at first close or second close or final close in the past two years, they collectively raised US$1.8 billion. This is just focused on Africa. Most of them actually focused on the seed to Series A stage,” Bayen, operating partner at the pre-seed venture capital fund, said.

He said funding, once heavily concentrated at the seed to Series A stage, a gap long described as Africa’s “missing middle”, is now gradually being filled by local capital. The “missing middle” refers to startups that are too large for microfinance but still considered too small or high-risk for traditional commercial bank loans, a financing gap that has historically stifled their growth.

“A couple of years ago, some would consider that as the missing middle. So, well, it looks like the middle is not missing anymore,” said Bayen.

Much of that capital, he said, is now coming from African general partners, local institutional investors, corporate venture arms and diaspora-backed funds, all helping to define how African startups raise and deploy capital.

Startup funding remained heavily concentrated in the four largest tech hubs of Nigeria, Kenya, Egypt and South Africa, commonly referred to as the ‘big four’ economies and startup ecosystems.

“You can see this is ridiculously stable between 80% to 85% for the past five years,” he said, referring to the share of funding raised in the ‘big four’ markets.

Africa’s ecosystem has proven more resilient than many expected and while African startups attract less than 1% of global VC funding, the continent has weathered the recent downturn better than other regions.

“If we basically put everybody on the base 100 starting in 2020, we can see that Africa has basically resisted better than other ecosystems. Africa is at 209, which means that there is twice as much funding that went to startups in Africa this year than there was in 2020,” explained Bayen.

Significant developments include the historic listing of two African startups on local exchanges in November, an extraordinary development in a market where the last major tech IPOs – Jumia and Fawry – dated back to 2019.

In South Africa, fintech Optasia listed on the Johannesburg Stock Exchange on November 4, raising US$345 million at a US$1.4 billion market capitalisation. Weeks later, on the opposite side of the continent, Moroccan fintech Cash Plus raised US$82.5 million through its IPO on the Casablanca Stock Exchange on November 25, at a valuation of US$550 million.

The two listings pointed to capacity of public markets on the continent to support venture-backed exits, long been viewed as a bottleneck for African VCs.

Speaking during the Next Chapter of African Venture Capital keynote speech at the same summit, Ventures Platform Founding Partner Kola Aina emphasised the need to bolster sustainability and capital efficiency.

“First, we need to acknowledge that our ecosystem is early. You don’t go to the gym after being out of the gym for all your life and try to bench press the biggest weights in the gym,” Aina said.

For Africa’s funding rebound to translate into long-term scale, Aina said there was a need for governments to play a more coordinated role, including designating startups as a critical development asset class and promoting progressive regulations that promote the growth of startups and the ecosystem.

“Africa’s venture future is collaborative rather than speculative. It’s a multiplayer sport. We will need governments, regulators, capital markets, venture capitalists and founders to work together to really jumpstart and accelerate the market for local liquidity,” Aina explained.