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.
Monthly Swings: African venture funding dropped from $343M in April 2025 to $254M in May, due to the absence of large deals in May. This volatility signals an uneven funding year for Africa, characterised by highs and lows driven by major transactions.
Sector Trends: Fintech remained a cornerstone of African startup funding in May, both in the number of deals and total amount. Proptech, Logistics and mobility grew with e-mobility solutions. Agritech paused but remains promising for food security. AI and deep tech are emerging, supported by accelerators and deal trends. Climate tech is growing with new funds and EV investments. E-commerce shifts towards B2B and retail enablement.
Geographic Concentration Shifts: Typically, Africa’s big deals have been spread between Nigeria, Kenya, South Africa, and Nigeria. But in May, Egypt alone dominated – nearly 80% of all funding. This was driven by multiple large Egyptian rounds closing in the same month.
Return of Large Rounds: Unlike March, which had no deals above $10M, May did see a few sizable rounds. In fact, May had one of the largest VC rounds of 2025 so far – Nawy’s $75M in Egypt – and two other eight-figure deals (Thndr and MoneyFellows). This indicates that big-ticket investments are returning, albeit selectively.
Investor Caution & Outlook: The overall mood in May 2025 can be described as cautiously optimistic. The steep funding drop in March had many worried that 2025 would be a down year, but April’s strong rebound and a decent (if subdued) May have reassured investors that 2024’s levels can be maintained. However, there is still plenty of caution in the air. Global macro factors weigh heavily: high interest rates in the US/EU mean less abundant capital for emerging markets, and many Africa-focused funds are pacing their investments accordingly.
