Latest news with #Africanstartups
Zawya
11-08-2025
- Business
- Zawya
African start-up funding rebounds, shifts to debt
The first half of 2025 has been kinder to African start-ups compared to the same period last year, with firms gaining increased access to funding from global investors. But a growing shift toward debt financing signals a more cautious approach to backing the continent's budding ventures. In the six months to June, the total value of venture capital funding attracted by African start-ups rose by 50 percent from $800 million in 2024 to $1.2 billion, data from the Africa Venture Capital Association (AVCA) shows. Some 80 percent of this funding pool was venture debt. The number of deals rose to 239 this year, up from 205 last year, an 11 percent increase. Of these, 22 percent, worth about $144 million, were in East Africa. But the increased funding may just be a bitter pill with a sweet coating. For the first time in history, venture debt – which brings its own pressures and risks for founders – has more than doubled the value of equity deals, tightening conditions for start-up founders across the continent.'Debt is very frustrating because the regulation landscape in Africa lacks the predictability, hence founders are unable to financially plan for their business growth,' said Mercy Kimalat, CEO of the Association Start-up and SMEs Enablers of Kenya (Assek). Of the $1.2 billion received, $971 million was in form of debt, a more than double increment from the $428 million recorded in the six months to June 2024 and a deviation from the traditional dominance of equity over debt.'Venture debt's momentum mirrors trends in the global private capital industry,' notes the AVCA in its mid-year update of VC activity on the continent.'This asset class grew by an impressive 14 percent between 2018 and 2024, gaining traction as a flexible, non-dilutive financing tool in an environment marked by tighter equity capital and prolonged exit timelines.'Start-ups that received debt funding attracted more value than those that got equity injections, the AVCA data shows. But equity funding often comes with a shared risk, differing from debt and pushes firms to seek revenue generation measures quicker to meet repayment deadlines. While the average amount of deal value rose by 31 percent -- from $5.9 million to $7.7 million -- the value of debt deals more than doubled, from $14 million to $33 million. According to AVCA, a majority of the deals signed, especially for equity injection, were below $3 million in value, and the bulk of the growth in the total value of funding came from a few big-ticket transactions largely in the financial technology industry. Debt dominated the high-value transactions. Over the period, there were only 29 debt deals, 12 percent of the 239 deals, but accounted for 80 percent of the total value of the funding, an indication that investors are willing to give the African start-ups more, but as debt and not equity.'The directional shift towards a cautious but credible recovery is clear,' AVCA notes. 'Deal volume is recovering faster than deal value, and while activity remains well below historic highs, the ecosystem is beginning to find its footing.'Last year was one of the worst for the continent's start-ups, as funding for early to mid- stage start-ups slumped to the lowest since 2020, coming on the back of global economic crises and shocks. The 2024 dip was blamed on tax hikes and high-octane political tensions, and unrest on the continent, which spooked investors draining funding for key innovation hubs such as Kenya, Nigeria, and South Africa. But some experts argue that investors have increasingly been disenchanted by a wave of start-up closures and collapses across the continent, which is also instigating the shift to debt instead of equity. Ms Kimalat contends that investors have grown less committed towards African start-ups and the priorities of institutional funders are rapidly changing to the detriment of the continent's budding firms.'It might be that investors are less committal (sic) because they could predict when they can exit the business,' Ms Kimalat told The EastAfrican. 'They also get funding from other institutional funders whose priorities are also changing.'Other than the shift to debt, another key trend this year is the rise in early-stage start-ups. Seed capital deals – the first major round for a start-up – accounted for 80 percent of the increase in the number of transactions closed. Seed funding rose 40 percent year-on-year, to reach $171 million in the first half, 'returning the segment to a comfortable one-third share of overall deal activity.' From the activity recorded in the first half, AVCA notes there is reason to be optimistic, though cautiously, that this year could turn out to be better than the last for the continent's start-ups.'If past trends hold, deal activity is likely to build gradually through the remainder of the year to match 2024's full-year volume,' the funders' union said in its half-year analysis.'While late-stage appetite remains limited and overall activity sits well below pre-downturn highs; the ecosystem appears to be settling into a new baseline. Sustained investor engagement in H2 could reinforce the slow but steady recovery observed in the first half.' © Copyright 2022 Nation Media Group. All Rights Reserved. Provided by SyndiGate Media Inc. (
Bloomberg
22-05-2025
- Business
- Bloomberg
FreezeLink CEO on Africa's Startup Ecosystem
Owusu Akoto, chief executive officer of FreezeLink, discusses the significance of patient capital to continue growth and momentum in the African startup landscape. "There is, from my perspective, an increase in momentum with challenging pension funds to fund alternative asset classes, including private equity and venture capital," Akoto tells Bloomberg's Jennifer Zabasajja at the Qatar Economic Forum 2025, powered by Bloomberg. (Source: Bloomberg)
