Africa’s tech ecosystem is undergoing a major shift as debt financing surpasses $1 billion in 2025, emerging from the shadows of equity to challenge traditional venture capital, according to data from Briter Intelligence.
For years, equity-dominated startup fundraising, particularly during the bubble of 2021 and 2022, when record-breaking sums were raised at inflated valuations.
But as that bubble burst and global investors pulled back, with startups beginning to turn to alternative instruments. Debt, once a niche option reserved for a handful of growth-stage firms, is now driving the recovery, reshaping the continent’s funding landscape.
Briter Intelligence data shows how dramatically things have changed. In 2021 and 2022, equity accounted for more than 80 percent of all startup funding, peaking in 2022 when over 1,000 equity-driven deals pushed capital inflows to historic highs.
Debt, by contrast, barely made any mark, representing less than 15 percent of capital raised, while grants and blended finance filled the remainder. But by 2023, equity volumes collapsed as global venture capital retreated, deal counts fell, and founders faced painful down rounds. Debt financing, however, began to rise steadily, surpassing $600 million as Development Finance Institutions (DFIs) and specialist credit providers sought safer ways to back African growth.
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By 2024, this pattern deepened. Equity stagnated while debt climbed again, supported by DFIs, corporate venture arms, and dedicated lenders. Grants remained relatively steady, between $200 million and $400 million annually, largely channelled into healthtech, agritech, and climate solutions. Increasingly, those grants were paired with debt facilities rather than equity, helping early-stage ventures to bridge financing gaps.
By August 2025, debt financing had surged past $1 billion, nearly matching the equity raised in the same period. For the first time, debt accounts for roughly half of total startup financing, compared with just a fraction three years ago.
For the first time, debt funding has surpassed the $1 billion mark in 2025, narrowing the gap with equity financing ($1.18 billion). This trend is particularly favourable for asset-heavy businesses. Notably, seven out of the top 10 most-funded companies in our Venture Pulse report leveraged debt to accelerate their growth.
“Debt funding unlocks equity funding for a lot of businesses. Pure equity investors do not want their money to go into an area of the business that will not ensure scale, because the idea of equity investment is to ensure scale. And so, one opportunity that debt funding is unlocking is increased equity financing for African startups. So, they rather raise debt, turn that money over, pay that debt off, while redeeming ownership of the business,” Samuel Frank, investment associate, Sahara Impact Ventures, told BusinessDay.
According to the African Private Capital Association (AVCA), venture debt accounted for 37 percent of total venture capital deal value in 2024, up three percentage points year-on-year, with even stronger momentum projected for 2025. By mid-2025, African startups had raised $1.35 billion, of which debt contributed $400 million, while equity reached $950 million, but still vulnerable to market volatility.
“This $1 billion milestone is transformative. While overall funding has contracted globally, we are witnessing higher-quality deals, sector diversification beyond fintech, increased venture debt utilisation, and a strengthening role for African investors,” said Abi Mustapha-Maduakor, CEO of AVCA.
Her remarks, drawn from AVCA’s April 2025 activity report, underscore how debt has grown outsized influence despite representing just 12 percent of transaction volumes, particularly in asset-heavy sectors such as logistics and renewable energy.
The trend is especially visible in East Africa. In Kenya, debt funding made up 34 percent of the country’s $382 million in startup capital in 2024, and that share is accelerating in 2025.
Read also: Startup taps local debt financing for expansion
Nairobi-based electric vehicle startup BasiGo illustrates the new model. In early 2025, it raised $42 million, blending $24 million in Series A equity with $17.5 million in debt, led by Africa50 and British International Investment. This hybrid structure will help the company deploy 1,000 electric buses across East Africa without ceding excessive ownership.
In Nigeria, FCMB Asset Management Limited (FCMB AM), in collaboration with TLG Capital, has announced that Series 1 of the FCMB-TLG Private Debt Fund has been fully deployed, following an oversubscribed raise. The first series was backed by 16 investors, including leading Pension Fund Administrators (PFAs) and institutional investors, and has already allocated capital to five mid-market Nigerian companies across sectors such as agriculture, healthcare, clean energy, and technology.
Among the beneficiaries are a major cocoa exporter expanding its export capacity; a large producer of medical consumables (syringes, facemasks) bolstering local health security; and a solar home & office systems provider working to increase energy access and reduce reliance on diesel.
The Series 1 deployment underscores private debt’s growing attractiveness in Nigeria as a scalable, risk-managed financing option for businesses with proven track records.
Spurred by strong investor demand and a robust pipeline of eligible enterprises, FCMBAM and TLG Capital are set to launch Series 2 of the FCMB-TLG Private Debt Fund, subject to regulatory approval from the Nigerian Securities and Exchange Commission.
Series 2 is expected to continue the focus on senior secured financing, maintaining disciplined underwriting, covenant protection, and a measurable impact framework. Targeted sectors include: healthcare, education, transport and logistics, and clean energy – areas seen as having strong development multipliers.
Debt may stifle innovation
Frank, earlier quoted, warned that continuous dependence on debt funding (especially for businesses who do not require them) may stifle innovation on the continent, arguing that it constrains businesses from pursuing new ideas. Innovation typically requires time before products can mature and align with market demand, he added.
Patrick Igwe of FSDH Merchant Bank added that debt suits companies with proven revenue streams and should not be taken prematurely. In a May 2025 analysis, he noted debt’s share rising from six percent in 2021 to 18 percent in 2024, driven by founders’ desire to retain control amid tighter equity markets. “Debt can strengthen businesses that have recurring cash flow, but for untested startups, it risks becoming a burden rather than a lifeline,” he said.
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A 2024 report by Partech tracked $3.2 billion in combined equity and debt across 534 deals, noting that while overall investment dipped by seven percent, disclosure rates for debt remained strong at 74 percent, evidence of growing confidence in the instrument. Fintech, with 45 percent of debt deals, and renewables, with 39 percent, remain the biggest beneficiaries.
“Debt is carving out a niche as a non-dilutive option for maturing startups,” Partech’s analysts wrote, adding that blended finance (combining grants with debt or equity) is gaining traction as a tool to unlock capital for riskier sectors.
At GITEX Africa, Dario Giuliani, founder, Briter Bridges, echoed this sentiment, stating, “There’s a growing demand for debt as an asset class. Startups are seeking working capital that equity alone cannot provide, particularly in high-growth industries like climate tech and logistics.”
