African VC Landscape Shows Signs of Recovery Amidst Challenges and Shifting Focus
Africa's venture capital scene, including Kenya, is recalibrating after a global downturn (52% drop in Africa's deal volume 2022-24). While a funding surge in April 2025 signals recovery, investors are more selective, focusing on developed ecosystems and profitable ventures. Fintech dominates, but faces a Series A crunch and gender disparity in funding, with Kenyan fintechs seeing a reduced share of investment in 2024.
The venture capital (VC) landscape in Africa, including its key hub in Kenya, is currently navigating a period of significant recalibration and cautious optimism. According to the "Venture Capital and the Rise of Africa's Tech Startups" report by the International Finance Corporation (IFC) (2025), the continent, like the rest of the world, experienced a global downturn in VC funding. This resulted in a notable 52% decrease in deal volume across Africa between 2022 and 2024, with the number of funded tech startups contracting to fewer than 400 by 2024.
Despite this challenging backdrop, early signs of a potential recovery began to emerge in the second half of 2024, a positive trend strongly corroborated by the significant surge in funding observed in April 2025. This suggests a cautious return of investor confidence to the market. However, investors are reportedly narrowing their focus, primarily targeting the more developed and mature startup ecosystems of Egypt, South Africa, Kenya, and Nigeria. This renewed, albeit more discerning, investor interest is likely to favor startups that can demonstrate strong business fundamentals, clear pathways to profitability, and sustainable growth models.
Fintech continues to be a dominant force in the African tech scene, with eight out of the nine African unicorns (startups valued at over $1 billion) in 2025 operating within this sector. Nevertheless, significant systemic challenges persist. A critical hurdle for African fintech startups, including those based in Kenya, is the difficult transition from seed funding to crucial Series A rounds. Data indicates that only about 5% of seed-funded African fintechs successfully secure Series A financing, a rate substantially lower than the global average. Average Series A deal sizes also experienced a decline in 2023, reflecting increased investor selectivity and a more cautious investment climate. Other pervasive challenges include early-stage capital bottlenecks, potential pattern-based investment biases that may overlook unconventional founders or innovative business models, the high cost of foreign debt which is often exacerbated by local currency fluctuations, deficiencies in investor storytelling and pitching by some founders, and various internal readiness issues within the startups themselves. Furthermore, a stark gender disparity continues to plague the investment landscape, with women-led businesses receiving their lowest-ever share of investment in 2024, accounting for just 6.8% of deals exceeding $100,000. The "Series A crunch" is a particularly acute problem, as this funding stage is vital for scaling operations and facilitating market expansion. Without access to this critical growth capital, many promising early-stage ventures across Africa may struggle to achieve their full potential, potentially stifling long-term innovation and economic impact. While fintech has historically been a major recipient of funding in Kenya, data for 2024 showed a shift, with Kenyan fintechs attracting only 13% of equity funding, a decrease from over 40% in previous years. This could suggest evolving investor interests, possibly towards more specialized fintech niches or a strategic diversification into other high-growth sectors such as healthtech, agritech, and e-mobility, where recent activities show significant promise and align with pressing societal needs.