As debt financing hits more than $1 billion in 2025, rivaling equity and challenging the supremacy of venture capital, Africa’s startup funding scene is quickly evolving.
Once thought of as a specialty choice, debt has become a lifeline for many growth-stage companies as international equity markets contract.
Equity made up more than 80% of startup capital in the boom years of 2021 and 2022, helping to set record valuations. Post-bubble downturn, however, caused international venture capital to withdraw, therefore pushing entrepreneurs to look for other solutions. Debt finance started to gain momentum by 2023, hitting $600 million as specialist lenders and development finance institutions came in with less-risk funding.
The News Chronicle gathered that this trend has become more pronounced as debt constitutes about half of all startup funding in 2025. For the first time, it nearly equaled equity inflows of $1.18 billion, therefore emphasizing a structural change in how African firms get growth capital. Seven of the top ten most-funded companies this year specifically used debt to expedite growth, showing investors’ interest in asset-heavy companies providing consistent returns.
After an oversubscribed raise, FCMB Asset Management Limited launched the first series of its Private Debt Fund in Nigeria together with TLG Capital. Already helping companies in agriculture, healthcare, clean energy, and technology, the fund is backed by institutional investors as well as administrators of pension funds. Among beneficiaries are a cocoa exporter increasing capacity, a medical consumables manufacturer improving health security, and a solar energy company extending access to off-grid populations.
Building on this momentum, a second series is in development aimed at sectors including healthcare, education, logistics, and clean energy—areas with great development impact.
Overdependence on debt could stifle innovation, according to some experts, though. They claim that repayment requirements could make it difficult for startups yet in the testing phase, to invest in long-term product development. While equity is still the better fit for early-stage innovation, experts advise that debt be used for businesses with established revenue streams.
Notwithstanding these reservations, confidence in debt continues to rise. With 45 percent and 39 percent respectively, fintech and renewable energy spearhead debt transactions according to a recent Partech study. Consequently, the growth of debt financing changes how African tech firms obtain long-term finance, rather than only filling a vacuum.
