Pragmatic Phase for African Venture Capital

The African private capital market is undergoing a significant shift toward pragmatism, according to delegates at the recent AVCA Venture Capital Summit in Nairobi. Despite ongoing fundraising challenges, venture-backed exits hit record levels in 2025, signaling a maturing ecosystem.

Record Exit Activity Amidst Fundraising Slowdown

While venture funding has slowed from its peak—mirroring global risk capital trends—2025 saw a notable 25% rebound to $3.4 billion. This occurred alongside a surge in exits through mergers and acquisitions, which increased by 72% year-on-year.

Rethinking Investment Approaches

Investors emphasized that the current environment is forcing a long-overdue reassessment of how capital is deployed on the continent. Rather than viewing this as a crisis, many see it as an opportunity to refine strategies and focus on sustainable growth.

“There’s a tendency to compare African venture capital to its US counterpart,” noted Tidjane Dème of Partech Partners. “But our market is young and evolving—it’s not broken, just different.”

Local Capital Takes Center Stage

As global funding moderates, there’s growing momentum toward local investment sources. AVCA CEO Abi Mustapha-Maduakor highlighted this trend, noting that the “center of gravity is moving toward local capital, local expertise, and local conviction.”

Alex Rumanyika of Uganda’s National Social Security Fund (NSSF) urged African pension funds to diversify beyond government securities and allocate more capital to private companies—warning that failure to do so could be an “existential threat.”

Alternative Financing Options Emerge

With IPOs remaining rare, investors are increasingly focusing on M&A as the primary exit route. Additionally, private credit is gaining traction as a financing option for established businesses seeking more predictable returns.

“What works in Africa is deploying into stronger, more resilient companies,” said Nathaniel Micklem of Ninety One. “We need to move beyond applying traditional private equity models too broadly.”

By embracing pragmatic approaches and prioritizing local expertise, African venture capital appears poised for sustainable growth even amidst global economic uncertainty.