Venture debt gains ground as South Africa's startup investment hits new high

Zawya

4 days ago

Southern Africa's venture capital (VC) market ended 2024 on a high note, reaching a record R13.35bn in active investments across 1,325 deals, a 24% increase from the previous year.
That's according to the latest data released in the 2025 Venture Capital Survey, which shows strong momentum in early-growth funding, greater diversity in deal types, and a maturing investment ecosystem, despite slower exit activity and ongoing global headwinds.
Series A deals surge as venture debt enters the picture
More than R3.29bn was deployed into startups in 2024, with R2.62bn in equity and a further R670m in venture debt — the first year this form of financing was tracked in the survey.
One of the most notable shifts was the surge in Series A funding, which rose to 42.5% of all deals, more than double the share recorded in 2023. The number of investment rounds climbed to 222, a 20% increase, involving 110 companies – the highest ever recorded.
While the overall equity deal value declined, the rise in deal volume and diversification of funding instruments signal a more resilient, flexible funding environment.
Tech dominates, health sees renewed investor appetite
As in previous years, ICT remained the top investment sector, capturing 65.9% of deal value. Within tech, software (20%), FinTech (15.9%), and online marketplaces (7.6%) stood out.
Notably, healthcare investment rebounded, climbing to 20% of deal value – its strongest showing in nearly a decade. Areas like life sciences, biotech, and medical devices saw renewed interest, pointing to broader sector diversification.
However, the report also flags the concentration of capital in just two sectors as a potential risk for long-term sustainability, urging wider support for underfunded industries.
Independents and angels drive activity as corporates pull back
Independent fund managers dominated the landscape, accounting for over 80% of all deals and capital deployed – the highest on record. Angel investors also made a comeback, contributing 10.3% of deal volume and value, their strongest showing since 2019.
Meanwhile, corporate and government-linked investors pulled back, contributing under 10% of total deals and capital. This reflects a shift back to agile, founder-focused funding, though it raises questions about the future role of institutional capital in the ecosystem.
Transformation showing steady progress
The report shows encouraging signs of transformation across the VC landscape. Over 42% of fund managers had at least one female founder, and a similar proportion had a black founder. Nearly a quarter achieved B-BBEE Level 4 or better, with female CEOs leading just over 21% of respondent firms.
These figures suggest growing inclusivity, but also highlight the need for continued efforts to broaden participation and leadership in the sector.
Exit activity remains a major constraint
Only three exits were recorded in 2024 – the lowest since the survey began. Key constraints include a limited buyer universe, lack of follow-on capital, and regulatory hurdles, such as exchange control rules.
To unlock the next growth phase, fund managers have called for stronger international networks, greater FDI, and larger fund sizes. Some hope remains pinned on co-investments and fund-of-funds models to crowd in new capital, particularly from pension funds and insurers.
Outlook: From promise to performance
Despite structural challenges, South Africa's VC market appears to be evolving in the right direction. With the rise of venture debt, deepening early-stage networks, and improving diversity, the industry is shifting from promise toward long-term performance.
The report closes with a call to action: build globally scalable startups, attract bold capital, and foster local resilience through smarter partnerships.