After a challenging 2024, early-stage African startups are bracing for a potential surge in venture funding in 2025, driven by expected lower interest rates and increased investor appetite. According to The Big Deal, a database tracking African startup funding, only 345 early-stage startups raised between $100,000 and $1 million in 2024, a 31.5% drop from 2023.

Despite the downturn, growth-stage startups fared better, with the number raising over $1 million dropping by just 10%. These startups captured the largest share of funding, leaving early-stage startups with only $242 million. As funding declines and concentrates among the largest startups, smaller players face growing competition for a shrinking pool of capital.

However, partners at early-stage African VC firms are advising their portfolio startups to focus on business fundamentals like sustainable growth and efficient cash management while building products that solve real market problems. They expect venture funding to increase in 2025, driven by the Trump presidency's potential pressure on the US Fed to cut interest rates, which could lead to more funding for early-stage startups.

According to Matt Davis, the co-CEO of Renew Capital, Africa's most active early-stage firm in 2024, "I expect less aid and a shift toward a more commercial relationship (from the US), which could lead to increased U.S. VC activity in Africa." Davis advises startups to focus on building products the market loves and a strong company, emphasizing that founders at the pre-seed and seed stage must be involved in every aspect of their business.

Olu Oyinsan, the managing partner of Oui Capital, echoes Davis' sentiments, urging startups to stick to fundamentals like recurring revenue, margins, and sustainable progressive growth. He also advises monitoring customer acquisition costs, predicting scarce capital in 2025.