Centre for Sustainable Structural Transformation

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Venture Capital in Africa: Bridging gaps, driving innovation, and fostering sustainable transformation

Venture capital (VC) firms have become essential financial intermediaries in Africa, bridging the critical funding gap for tech startups in recent decades. 

Since 2015, the size of Africa's VC ecosystem has experienced remarkable growth, with the total capital invested rising from $277 million to $6.5 billion in 2022. VC investments are reshaping the continent's economic landscape, fueling startup growth across fintech, e-commerce, enterprise solutions, Agritech, health tech, and cleantech sectors. VC investments are driving innovation, creating jobs, addressing social challenges, and developing historically under-resourced industries.

However, while data exists on VC deployment (geography, sector, stage, funding round size), limited insight exists regarding the drivers of performance and returns and the transformative impact on employment, market inclusion (particularly underserved markets), industrial innovation (including the disruption of established sectors), and the long-term sustainability of funded companies in the African context.

The objective of this research stream is threefold:

  • First, it focuses on understanding how venture capital funds operate in African countries, as the functioning and composition of VC funds differ from those in Europe, Asia, and the USA. 
  • Second, it examines how new venture capital introduces business models that address specific problems, create new markets, and overcome issues associated with "broken verticals," thereby contributing to sustainable structural transformation. 
  • Third, it investigates the factors driving successful exits of VC-backed companies in Africa and the barriers that hinder them.

Picture: micheile henderson via Unsplash.

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