Within the early-stage African venture capital landscape, it is advised for startups to prioritize business fundamentals such as sustainable growth and efficient cash management. The anticipation for increased venture funding in 2025 is high, following a challenging 2024 where early-stage startups faced a significant decline in funding.
Despite the funding downturn, growth-stage startups were relatively less affected, with a slight decrease in the number of startups raising over $1 million. This resulted in more significant funding concentration among larger startups, leaving smaller players competing for limited capital.
With the possibility of the US Federal Reserve cutting interest rates in 2025 under the Trump presidency, international investors may shift focus towards high-growth investment opportunities, potentially benefiting early-stage startups in Africa.
The advice given to portfolio startups by VC firms emphasizes the importance of focusing on sustainable growth, recurring revenue, margins, and efficient cash management. Startups are encouraged to maintain a strong business foundation and avoid inflated valuations seen in the past.
Looking towards 2025, there are contrasting views on the funding outlook. While some expect a reversal of the funding decline with larger deal sizes for startups demonstrating positive unit economics, others foresee continued concentration of capital among a select group of companies.
The need for “blended capital” funding is highlighted for early-stage startups, suggesting a mix of financing options like convertible notes, grants, and venture capital to support growth. Debt funding is also expected to make a comeback due to reduced early-stage funding appetite.
In terms of sectors expected to receive significant funding, climate tech and fintech are projected to continue dominating investments, with potential growth in media and entertainment. Additionally, emerging sectors like artificial intelligence, healthtech, and enterprise software targeting SMEs are recommended for investment consideration in 2025.