As Q1 2025 ends, investor sentiment in African tech can be described as cautiously resilient. There is recognition that Africa’s long-term growth drivers – a young population, increasing digitalization, underserved markets – remain intact, and perhaps even strengthened by the lessons of the past year. However, after the exuberance of 2021 and the shocks of 2022–23, investors are now far more disciplined. Venture capitalists are focusing on startups with strong unit economics and clearer paths to profitability. The mantra seems to be “growth with prudence.”
Founders report that during fundraising, they face tougher questions about revenue, burn rate, and timeline to break-even. This discipline is healthy: it weeds out weaker models and encourages realistic business building. For instance, many startups have cut extra costs and optimized operations – those that survived 2023’s funding crunch are emerging leaner and more efficient.
At the macro level, risks remain: high global interest rates could persist longer, which would keep funding flows tighter. Any resurgence of inflation (e.g. due to commodity price spikes) could force African central banks to tighten further, dampening economic activity. Political risks, such as elections (there are important elections in DRC, Zimbabwe later in 2025) or instability (Sudan’s conflict, Sahel insecurity), can also spill over into investor confidence if regional contagion occurs. Currency volatility is a perennial concern; even though Q1 was relatively calm, one eye is on the US dollar – if it strengthens again, some African currencies could wobble.
Investors are pricing these macro risks in, often via lower valuations. Indeed, one trend is valuation correction – startups that might have commanded 10x ARR a couple years ago are now raising at maybe 4–6x ARR, making deals more attractive to investors who do come in.
Sharp Decline in Funding: March 2025 funding totalled only $50 M, a steep drop and the lowest monthly sum since late 2020. This was an 82% decline from January 2025’s ~$289M boom, indicating a significant cooldown in investor activity.
No Mega-Deals: March had no funding rounds above $10M, with only smaller seed and pre-Series A investments. This absence of large deals contributed significantly to the month’s funding dip.
Early-Stage Dominance: Without mega-deals, early-stage rounds (pre-seed, seed, and some pre-Series A) dominated March. The median deal size was low, focusing on initial capital for startups, reflecting cautious investor sentiment.
Geographic Concentration Persists: Africa’s “Big Four” – Nigeria, Kenya, South Africa, and Egypt – took 83% of March’s funding, with Nigeria and Kenya making up nearly half. Other countries like Ghana saw little activity, highlighting ongoing regional disparities.
Sector Highlights: Fintech dominated, featuring in nearly half of all deals. Logistics and agritech followed with solid mid-sized rounds, while cleantech drew attention through a single notable deal. Healthtech was quiet, with no major activity.
Investor Caution & Outlook: March’s slowdown raised concerns about 2025’s momentum, with macro factors and geopolitical uncertainty fueling investor caution. The gender gap persisted, with female-led startups receiving only ~2% of Q1 funding. However, the number of $1M+ rounds remained stable, indicating some resilience. Stakeholders are watching for a rebound or continued slowdown, with April’s early deep-tech deal offering hope for recovery.
