When Winter Breeds Winners: Our Perspectives on 2025

A perspective on Africa's evolving technology landscape in 2025.

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The global technology ecosystem has experienced an unprecedented transformation since the exuberant period of 2021, when venture capital flowed abundantly and company valuations reached stratospheric levels. The subsequent correction, characterized by the prolonged 2023-24 funding winter, has catalyzed a comprehensive reevaluation of sustainable business growth principles. The resulting paradigm shift has crystallized into an unmistakable truth: unit economics reigns supreme in this new era of technological advancement.

This transformative period has manifested with particular intensity across Africa's technology landscape, where total venture funding experienced a significant contraction from $6.5 billion in 2022 to $4.5 billion in 2024 - a 30% decline that masks a more sophisticated underlying narrative. While the absolute volume of capital deployment has diminished, the qualitative aspects of investments have undergone a remarkable enhancement. Notable success stories such as MNT-Halan in Egypt and Moniepoint in Nigeria have convincingly demonstrated that meticulously structured businesses with robust fundamentals continue to attract substantial capital investments, evidenced by their impressive funding rounds of $400 million and $200 million respectively.

The startups that have successfully weathered this period of market turbulence consistently exhibit several distinctive characteristics: unwavering commitment to fundamental business principles, sophisticated cash management protocols, and an unrelenting focus on achieving sustainable profitability. Recent analysis from Africa: The Big Deal reveals a striking evolution in financial planning maturity - 73% of African startups that secured funding in 2024 maintained a conservative minimum runway of 18-24 months, representing a substantial improvement from the 45% observed in 2021. This marked shift signifies the emergence of a more sophisticated approach to business development, prioritizing sustainable, measured growth over the previously prevalent "blitzscaling" methodology that dominated the ecosystem.

This evolutionary trajectory is particularly evident within our portfolio at Ventures Platform, where portfolio companies have demonstrated remarkable adaptability and resilience in navigating the challenging market conditions. Recent successful funding rounds, including Lemfi's substantial $53 million Series B financing and SeamlessHR's strategic $9 million Series A extension, exemplify this emerging pattern.  Juicyway recently announced a $3 million pre-seed round, while MoneyHash in Egypt raised a $5.2 million Pre-Series A round to accelerate market expansion. These achievements should not be viewed as isolated incidents but rather as signs of a broader market movement, where investors increasingly direct capital toward startups that successfully integrate technological innovation with prudent financial stewardship.

The investment ecosystem itself has undergone significant maturation and sophistication. According to the comprehensive Partech 2024 Africa Tech Venture Capital Report, while aggregate funding volumes have decreased, the average transaction size for Series A investments has experienced a notable 15% increase, indicating a shift toward more selective but substantive capital deployments. The due diligence process has evolved to become increasingly thorough and comprehensive, with the typical duration from term sheet issuance to transaction completion extending from 45 to 90 days, reflecting enhanced investor scrutiny and sophistication.

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Global Economic and Geopolitical Trends Shaping 2025

The macroeconomic landscape for 2025 presents a multifaceted and intricate scenario. Global inflationary pressures, which peaked at 6.8% in 2023, are projected to moderate to a more manageable 4.5% by 2025, according to detailed IMF forecasts and economic models. This anticipated stabilization occurs against the backdrop of divergent growth trajectories, with emerging markets projected to achieve robust GDP growth of 3.1%, substantially outperforming the more modest 1.4% growth expectations for developed economies.

The contemporary geopolitical environment presents a complex matrix of challenges and opportunities for strategic consideration. The increasing prevalence of protectionist economic policies in advanced economies - exemplified by comprehensive legislation such as the CHIPS Act in the United States and the European Union's far-reaching Digital Markets Act - is fundamentally restructuring global supply chains and technological ecosystems. For Africa, this strategic realignment presents unprecedented opportunities to strengthen indigenous innovation capabilities and reduce technological dependencies on external markets.

Africa's demographic advantage - characterized by a remarkably young population with 60% under 25 years of age and rapidly expanding internet penetration growing at an annual rate of 11% - positions the continent as an increasingly compelling destination for global capital seeking high-growth market opportunities. According to comprehensive analysis from McKinsey, Africa's digital economy demonstrates exceptional potential, with projections indicating it could contribute an impressive $712 billion to continental GDP by 2025, representing a remarkable threefold increase from 2022 levels.

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Key Developments and Opportunities

Against this backdrop, here are 6  key things we expect to see in 2025:

1. Modest to High GDP Growth
   Several African economies are projected to rank among the fastest-growing in 2025. According to the World Bank, countries like Côte d’Ivoire, Tanzania, and Senegal are leading the pack, driven by strategic reforms and expanding sectors. This economic growth will create a fertile ground for startups to thrive, particularly in sectors like fintech, agritech, and renewable energy.
2. FX Stabilization
   After a cycle of steep depreciation, African currencies are expected to see improved stability in 2025. This shift will provide startups and businesses with much-needed predictability, reducing the risks associated with currency volatility and making the continent more attractive to foreign investors.
3. US Tech Rebound and Its Ripple Effects
   The U.S. tech and stock markets are set for a strong rebound in 2025, with increased IPO and M&A activity. This revival is likely to unlock more private capital for African startups, as global investors seek higher returns in emerging markets. According to the Partech 2024 Africa Tech Venture Capital Report, African startups raised $4.5 billion in 2023, a 25% decline from 2022 but still a significant figure given the global funding winter. This trend is expected to reverse in 2025, with possible increased capital flow into the continent.
4. The Rise of AI and Climate Tech
   Artificial intelligence and climate tech are poised to take center stage in Africa’s tech ecosystem. Startups are leveraging AI to solve local challenges, from healthcare diagnostics to agricultural optimization. For example, Nigerian healthtech startup Remedial Health is using AI to streamline pharmaceutical supply chains, while Thrive Agric, an agricultural-led startup, uses AI to analyze large amounts of data about small holder farmers, land, weather conditions, and crop health, allowing them to provide targeted financial support, data-driven farming advice, and market access, ultimately optimizing crop yields and improving the livelihood of farmers across Africa. Beyond health and agriculture, AI is also transforming Africa’s informal retail sector. In Senegal, Lengo AI is leveraging AI to help brands make data-driven decisions by addressing crucial infrastructural challenges, including data gaps and information imbalances in informal retail markets. Climate tech is another area of immense potential. With Africa contributing less than 4% of global carbon emissions but bearing the brunt of climate change, the continent is uniquely positioned to lead in renewable energy and sustainable solutions. Examples of startups innovating around this are SunFI and Payhippo - both connecting Africans who want clean energy access to payment plans that match their needs; reducing dependence on fossil fuels and lowering greenhouse gas emissions. According to Africa: The Big Deal, climate tech startups raised over $500 million in 2023, a figure expected to grow in 2025 as global interest in sustainability intensifies.‍
5. Geographic Expansion Beyond Traditional Hubs
   While Lagos, Nairobi, and Cape Town remain key tech hubs, cities in Francophone Africa - such as Abidjan, Dakar, and Casablanca - are emerging as hotspots for investment and innovation. These markets offer untapped potential in sectors like fintech, healthtech, and e-commerce, attracting both local and global investors.‍
6. Regulatory Reforms and Their Impact
   Governments across Africa are rolling out reforms to support the tech ecosystem. In Nigeria, the Startup Act is expected to streamline regulations and provide incentives for startups - Its implementation could unlock $250M+ in local investments through tax incentive, and drive a potential 30% reduction in startup operational costs through proposed regulatory frameworks. In the same vein, Kenya’s Digital Economy Blueprint aims to foster innovation and digital inclusion. These reforms will create a more favorable environment for startups but will also require founders to navigate an evolving regulatory landscape.

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‍Regulatory Insights for 2025

‍While the perspective for 2025 is promising, regulatory hurdles and geopolitical complexities across the continent may present challenges for founders who struggle to navigate their local regulatory landscapes.To help founders align their strategic priorities for the year ahead, we’ve highlighted key policy shifts that will shape the ecosystem in 2025 - insights drawn from our Venture Partner, Innocent Isichei’s presentation at our recently concluded Founders’ Retreat in January.

1. Regulation:
   
   • Nigeria is set to issue more Virtual Assets licenses in 2025.
   • Kenya is preparing its VASP (Virtual Asset Service Providers) framework.
   • Kenya and Nigeria will undergo significant tax reforms that will impact businesses.

2. Cross-Border Payments:
   
   • Ethiopia, Egypt, and Nigeria will implement remittance market reforms.
   • Increased interoperability between national payment networks is expected.
   • Tighter KYC/AML (Know Your Customer/Anti-Money Laundering) scrutiny will be applied to remittance flows.

3. Cybersecurity:
   
   • Stricter KYC verification measures will be enforced.
   • Transaction monitoring will become more rigorous.
   • Automatic chargebacks will be introduced to enhance consumer protection.

To stay competitive amid these changes, he emphasized four key startup priorities for 2025:

• Compliance: Founders must align with regulations, invest in robust fraud prevention tools, and establish clear KYC, KYB, and transaction monitoring systems. Timely and transparent reporting of suspicious transactions is critical.
• Governance: Startups should strengthen their board structures, ensuring accountability through regular board and committee meetings.
• Advocacy: Engaging with industry peers to help shape supportive policies will be crucial for ecosystem growth.
• Leveraging Regulatory Changes: Staying ahead of macroeconomic shifts and adapting to new policies will position startups for long-term success.

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‍Conclusion: Africa as the Frontier of Innovation

‍The African startup ecosystem currently occupies a critical inflection point in its evolution. While the residual effects of the funding winter continue to reverberate through the market, initial thoughts indicate that 2025 will represent a turning point, with aggregate startup funding projected to surpass what was raised in 2024. This anticipated resurgence will be propelled by three catalysts: a recovery in investor confidence levels, the strategic deployment of accumulated dry powder (currently estimated at $1.5 billion across Africa-focused growth-stage investment vehicles), and increased participation from domestic institutional investors.The early-stage investment segment is projected to experience particularly robust growth, with a forecasted 30% year-over-year increase in deal activity, with special emphasis on ventures leveraging cutting-edge artificial intelligence applications and innovative climate technology solutions. The strategic trend toward Pan-African market expansion is expected to accelerate significantly, with approximately 45% of startups actively pursuing multi-market growth strategies. This geographic diversification strategy, combined with enhanced focus on unit economics and increasingly robust regulatory frameworks, establishes a strong foundation for a more resilient and sustainable African technology ecosystem.The strategic roadmap for 2025 has emerged with remarkable clarity: sustainable growth will be achieved through disciplined financial management, unwavering focus on profitability metrics, and the development of scalable solutions addressing fundamental market challenges. While the era characterized by abundant capital availability may have concluded, the African technology ecosystem appears poised to enter a transformative and impactful phase of development.

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‍Kola Aina and Dotun Olowoporoku are General Partners at Ventures Platform.

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