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Fundraising has become the defining challenge for Africa’s investment industry in 2025, with a record number of fund managers chasing a shrinking pool of capital, according to Michael Famoroti, head of research at Stears.
He stated this while speaking at the Lagos Venture Finance Summit, noting that while the number of funds reaching final close has rebounded since the COVID-19 dip in 2020, the actual value of funds raised has declined since 2022.
“After the pandemic, we saw more funds closing, but less money was being committed. Essentially, more managers were competing for a smaller pool of capital, and that’s worrying. Although 2024 showed a partial recovery, it’s too early to tell if that rebound will last,” Famoroti said.
Famoroti explained that investors are shifting away from broad-based funds and instead backing specialist vehicles. Sectoral or thematic funds, from fintech to food security, are gaining traction, with investors seeking sharper exposure and fund managers offering niche expertise.
He highlighted the Cold Chain Solutions East Africa Fund, launched in 2022 by Arch Emerging Partners, as an example of this trend. The fund, focused exclusively on cold chain logistics across Uganda, Rwanda, Kenya, Ethiopia, and Tanzania, recently saw one of its portfolio companies secure $80 million in senior debt from Signum Capital.
“For limited partners, the appeal is clear. They want direct access to sectors they believe in and managers who have developed deep expertise,” Famoroti stated.
Another fast-growing trend is debt financing. In 2024, debt funds closed nearly $700 million, the second-highest level in 30 years. Beyond venture debt, private credit has emerged as a key driver of capital flow.
“Over half of the general partners we surveyed expect private debt to outpace private equity as a fundraising vehicle in the next three years. Debt’s self-liquidating nature also makes it attractive to domestic institutional investors such as pension funds that need more liquidity,” Famoroti said.
Even with the fundraising squeeze, Famoroti argued that Africa’s growth story continues to underpin investment interest. Stears’ research shows African businesses still trade at valuation discounts compared to peers in Latin America or Asia, but investors are paying premiums for smaller, fast-growing companies, which is a signal that growth remains the fundamental draw.
Read also: “We’ve catalyzed $3.5bn into Africa by betting on first-time fund managers”
“Fundraising may be tougher, but appetite for Africa is not gone. It is simply becoming more selective and more local,” Famoroti said.
Akintoye Akindele, chairman of Platform Capital, has called for a radical rethink of investment strategies in Africa, urging investors to embrace ‘capital with a conscience’ that balances profit with social impact and long-term sustainability.
He argued that Africa’s development cannot be built on short-term capital cycles, but requires patient investment that empowers entrepreneurs, protects jobs, and solves real problems.
“You can’t do it one at a time. You can’t chase quick exits,” Akindele said. “ That money is exposed to every election cycle, every macroeconomic shock. So why not commit to building something that lasts longer? For us, capital must have a conscience.”
Platform Capital has seen extraordinary returns from investments that targeted both profitability and social impact. From clean energy startups in Kenya replacing kerosene with ethanol for over one million households, to ventures converting human waste into energy, he said, while noting that the model works.
“If you don’t make profits, you can’t impact. If you don’t impact, you can’t make profits. It’s a cycle that must continue. That handshake between profit and impact is where sustainable development happens.
“In Africa, every election cycle creates headwinds. If your fund is only five to ten years, what are you really doing? You need a 15-year, even 20-year view to build resilient enterprises,” he said, criticising traditional private equity structures that rely on five-year investment and exit cycles, calling them unsuitable for Africa.
Akindele revealed that Platform Capital commits mostly its own resources, with 97 percent of its funds sourced internally, ensuring it can shield portfolio companies from pressure for quick exits.
“We guarantee people’s money, but we don’t abandon businesses. We stay. That’s the only way Africa can grow,” Akindele said, urging African entrepreneurs to ignore pressures to scale unsustainably fast or conform to Western benchmarks like discounted cash flow models and five-year breakeven rules.
He advocated for fundamentals-driven growth anchored on customer loyalty and resilience. “Don’t look at your business as if it’s five years old and it must break even. Coca-Cola sold only 16 bottles in its first year. But over the decades, it grew. That’s the kind of patience Africa needs.”
On future opportunities, Akindele highlighted climate tech, health tech, and women-focused technology as the most promising investment areas for Africa over the next five years. He also urged African startups to look to Latin America, not Silicon Valley, as the closest comparable ecosystem.
“Africa is still the future, but it requires resilience, not strength. Strength can be broken. Toughness, like leather, survives the process and becomes stronger,” Akindele said.
