African startups significantly ramped up debt fundraising in 2025, nearly doubling the amount raised from credit instruments even as equity financing from venture capital firms slowed.
This is according to the African Private Capital Association (AVCA) 2025 Venture Capital report released on Thursday.
The report shows that startups on the continent raised $1.8 billion in debt last year, representing a 91% increase compared to 2024.
Debt accounted for 46% of the total $3.9 billion secured by African startups in 2025.
In contrast, equity funding declined sharply.
Startups raised $2.1 billion in equity during the year, a 21% drop from the previous year, reflecting more cautious investor sentiment and tighter capital conditions globally.
What they are saying
Commenting on the report, Head of Research at AVCA, Nadia Coulibaly, said the growing shift toward credit is consistent with broader global trends.
- “We do think it is a trend that will stay in the market, as we see in the global market. It reflects tighter equity conditions for startups. Equity costs a lot; investors are cautious,” she said.
Coulibaly described debt as “becoming a defining anchor for the venture capital landscape” in Africa, adding that the shift signals a maturing ecosystem that will likely support a broader range of financing instruments in the years ahead.
More insights
Startup equity funding in Africa had surged through 2022, but accelerating inflation, higher global interest rates, and economic uncertainty triggered a pullback from investors, particularly foreign venture capital firms.
That retreat has opened up space for domestic financiers and alternative funding providers, especially development finance institutions.
- The report shows that Africa-based development finance institutions contributed 63% of total startup funding in 2025, marking a reversal from the 2022 to 2024 period when international DFIs accounted for as much as 94% of commitments.
- African investors also increased their participation significantly, accounting for 45% of total commitments in 2025, compared to an average of 23% between 2022 and 2024.
- Despite the strong growth in debt financing, the market remains highly concentrated. Six megadeals accounted for $1.1 billion, or 60% of total debt raised in 2025.
Among the largest transactions were landmark funding rounds by Kenya’s Sun King and Senegal’s Wave, underscoring how established, high-growth startups are driving much of the credit expansion.
What you should know
Amid declining equity funding, Law firm, The New Practice (TNP), recently urged Nigerian startups to rethink their approach to scaling by embracing debt markets as a viable growth tool.
At a roundtable on debt financing organized by the firm, financial experts dissected why debt is now a better alternative to equity for Nigerian startups, noting that debt forces startup founders to stay alert, responsible, and more financially disciplined.
They stressed that debt compels founders to plan, meet timelines, and maintain financial hygiene, creating a foundation for sustainable growth.
