Why Western Venture Capitalists Should Bet on Africa Now

As the U.S. ramps up engagement in Africa, private capital—not government aid—is set to define the next chapter of U.S.-Africa relations.

Source: The Guardian Nigeria

Across the Sahel, a quiet but strategic recalibration is underway. While Western VCs fixate on the rising digital economies of Latin America and the Middle East, African states are positioning themselves as emerging players in global tech and venture markets.

From Cape Town’s AI clusters to Nairobi’s fintech boom, governments are betting big on digital economies. In 2024, African tech startups raised roughly $2.2 billion across equity, debt, and grants. The data-center market—valued at $1.26 billion in 2024—is projected to reach $3.06 billion by 2030. Countries like Egypt have unveiled ambitious national AI plans to become continental tech hubs.

This internal push coincides with another one from across the Atlantic. Determined to chip away at Beijing’s grip on critical minerals and infrastructure, Washington is expanding its footprint on the continent.

The U.S. has committed $550 million to the Lobito Corridor, a railway linking Zambia and the DRC to Angola’s Atlantic coast, creating an export route for key minerals outside Chinese control. A recent Washington-brokered peace deal between the DRC and Rwanda signals additional interest in opening the region to U.S.-aligned mining and infrastructure. And while China’s footprint remains dominant, many African governments are increasingly open to recalibrating ties with Western partners.

Taken together, these shifts are paving the way for a new phase of economic engagement, one in which venture capital could play a defining role.

Why Africa?

For decades, Africa was viewed through the narrow lens of aid and extraction. That narrative is evolving.

Eric Schneider, founder of RéseauLink LLC, a consultancy focused on U.S.-Africa relations through its flagship Akwaba African Diaspora Festival, argues the public-sector institutions that once shaped the U.S.-Africa relations are losing influence.

“We’re not going to see as much from government institutions like USAID or the African Development Foundation,” Schneider said. “I think the administration’s ‘aid not trade’ is something that Washington is really pushing.”

He believes private-sector actors will determine the trajectory of Washington’s engagement.

“I still agree that private companies are really going to be leading the charge… in a lot of investments, public–private partnerships in Africa with African governments and American mining companies.”

While geopolitics remains a driver of Washington’s renewed focus, VCs are eyeing several structural advantages within Africa’s startup ecosystems:

Strategic Locations. Countries best positioned to leverage AI–Egypt bridging Europe, the Middle East, and Africa; South Africa as a major maritime corridor–stand to benefit from regional flows of talent and trade.

Mineral Wealth. Africa could produce up to 10% of global rare earths by 2030. Tech ventures can leverage local supply chains in ways few other regions can.

Youth Population. Africa has the world’s largest youth population, with 70% of Sub-Saharan Africans under 30, and by 2030 the continent will represent 42% of the world’s youth. For global VCs, this is a vast, undercapitalized workforce and consumer base.

Already, Western VC momentum is visible:

• Digital Currency Group (Connecticut): Completed 12 African deals in 2024 across fintech, AI, and data companies in Côte d’Ivoire, Egypt, Kenya, Nigeria, and Tanzania.

• Black Ostrich Ventures (Los Angeles): Launched a $20 million African fund focused on clean tech, supply chain, agricutlural tech, and edtech in Tanzania, Zambia, Morocco, and Uganda.
  Acrew Capital (San Francisco): Led a $40 million Series A for Tanzanian fintech NALA, with participation from other Western investors.

Notably, this momentum predates recent foreign policy moves.

“Whether the administration is serious about U.S.-Africa engagement or not, the market is moving toward Africa anyway,” Schneider said.

Washington’s renewed attention may accelerate this flow of VC investment even further.

Risks Abound

Despite the opportunities, significant risks remain, particularly political instability and fragmented regulation.

Political Instability

Even the continent’s strongest tech hubs face volatility. Nigeria, a major center for African startups, continues to battle insurgency and sits near conflict-affected neighbors.

Egypt–arguably Africa’s most ambitious innovation landscape–is surrounded by unstable states like Sudan and Libya. Economic pressures and security threats raise the likelihood that Western businesses may be targeted by militants or non-state actors.

Fragmented Legislation

No two African countries share the same regulatory framework for startups. This creates friction for cross-border expansion and amplifies legal risk for VCs.

Tunisia’s 2018 Startup Act offers tax exemptions, a founder salary, and clear startup criteria. Nigeria’s 2022 Act provides streamlined licensing, especially for fintech, but implementation remains uneven. A startup that qualifies easily in one country may face strict or unclear rules in another. The result: higher compliance costs, slower expansion, and more uncertain exit pathways.

“It depends on each country,” Schneider said. “I think it’s much easier for an entrepreneur in Côte d’Ivoire than other states to have economic mobility when it comes to certain industries like imports and exports logistics.”

There’s a geopolitical dimension too. A surge of Western VC coinciding with U.S. strategic engagement may be viewed with suspicion.

“I think [Africans] necessarily have to [view VC funding] in geopolitical terms,” Schneider said. “That’s just the reality of international politics.”

As a result, VCs could face backlash if investments appear externally driven rather than locally grounded.

Venture Capital: The Future of U.S.-Africa Relations?

The declining influence of USAID and similar bodies has created a void the private sector is poised to fill. As that happens, it is crucial that African youth development remains the centerpiece of engagement.

“African leaders need to prioritize their youth,” Schneider said. “Job and vocational training must be at the center of any investment or deal.”

Pairing Africa’s digital potential with Western VC funding can be part of that prioritization. But how this reshapes the continent’s global role remains an open question.

“We’re seeing a fractured, multipolar world and it looks like teams are being created,” Schneider said. “African leaders need to play their cards wisely for their own sakes.”