The African Private Capital Association (Avca) finds in its ‘2024 Venture Capital in Africa’ report that last year was challenging for African startup companies, while the continent had also reached a funding low in the first half of the year.

Africa experienced a pronounced delayed impact on dealmaking during a period of inflation, supply chain disruption and geopolitical shocks, the report states.

African startups recorded a 22% year-on-year decline in deal value and a 28% decrease in deal volume.

While global venture capital value rose 6% and volume fell 24%, Africa's sharper contractions reflect the continent's delayed downturn cycle. Venture debt lenders comprised only 12% of deal volume yet generated 37% of venture deal value in 2024.

Avca further reports that West Africa maintained its lead as the most active region for the fourth consecutive year, accounting for 23% of total deal volume. Nigeria, in particular, accounted for 16% of deal volume in the year.

The four biggest markets – Nigeria, Egypt, Kenya and South Africa – accounted for 55% of volume and 64% of value for deals in 2024.

Avca says financial technology (fintech) remained a dominant area of investment, with 116 deals having raised $1.4-billion in 2024.

Clean and climate technology rose to 13% of tech-enabled deal volume, up from a 7% five-year average, while AI reached the top four most funded verticals for the first time – with 42 deals raising $108-million.

In a significant milestone, African investors emerged as the single largest group of active participants in venture capital, representing 31% of the total investor pool compared with 19% a decade ago. This underscores the momentum in domestic capital formation despite overall investor participation declining 21% from 2023 to 614 active investors, Avca states.

The fundraising environment showed remarkable resilience, with eight funds closing at $736-million in 2024 alone, marking a 41% year-on-year increase that underscores the positive, long-term growth of Africa’s venture capital ecosystem despite global headwinds.

Since 2015, 35 fund managers across 41 funds have raised $2.7-billion in final closes, reflecting a 25% compound yearly growth rate.

Avca finds that the exit landscape is gaining momentum, with 138 exits recorded between 2019 and 2024, which reflects a clear upward trend over time, despite having remained flat in 2024 with 26 exits recorded.

Trade sales continued to dominate in the year, accounting for 84% of all exits with an average holding period of 3.8 years.

Avca CEO Abi Mustapa-Maduakor says the latest data demonstrates how Africa's venture capital ecosystem is responding to global challenges with notable resilience.

“While overall funding has contracted, we are seeing strategic adaptations – higher quality deals, sector diversification beyond fintech, increased venture debt utilisation, and the strengthening role of African investors,” he adds.

These responses reflect a maturing market that continues to present compelling opportunities, Mustapa-Maduakor states.

He is optimistic about the venture landscape in Africa, particularly as it offers investors unique exposure to fast-growing markets with demographic advantages and innovation potential compared to more traditional investment destinations.