The vibrant landscape of African e-commerce startups is experiencing a noticeable shift as investor enthusiasm wanes, with year-on-year funding figures for the first quarter of 2025 revealing a significant drop of 47.2%. Data from "Africa: The Big Deal," a prominent database for startup transactions, indicates that total funding in the sector plummeted to $11.3 million, a sharp decline from the $21.4 million secured during the same period in 2024.
This tightening of investment reflects a broader cooling in private markets and a strategic reassessment of the e-commerce sector by investors. Concerns surrounding intense competition, challenging unit economics, and general growth uncertainties appear to be pushing investors towards more conservative bets in alternative sectors.
While the overall trend points to a slowdown, the quarter wasn't entirely devoid of significant activity. Egypt's Taager, a social e-commerce platform empowering online merchants with end-to-end logistics, successfully raised $6.8 million in a Pre-Series B round led by Breyer Capital. Similarly, Kenya's Kapu, a grocery-buying service specializing in group purchases, secured $2 million in a Pre-Series A round from Base Capital. However, these notable deals could not offset the overall decline, and the average deal size in Q1 2025 noticeably shrank compared to the previous year.
Perhaps the most telling indicator of a dwindling appetite for risk is the complete absence of seed funding rounds in the e-commerce sector for Q1 2025. This stands in stark contrast to the $3 million raised by startups like Badili and Dawa Mkononi in seed rounds during the first quarter of 2024. The shift suggests that early-stage investors are becoming increasingly hesitant to back nascent e-commerce ventures.
African e-commerce startups are grappling with a confluence of increasing challenges. Gaining significant market share proves difficult amidst intense competition from established giants such as Jumia, Zando, and Konga. Furthermore, the rising cost of acquiring customers continues to erode profitability.
These hurdles are likely contributing to the pullback in investment, as investors prioritize ventures demonstrating clearer paths to profitability over those focused solely on high growth. The emphasis has clearly shifted towards sectors with stronger unit economics and a more predictable return on investment.
This decline in e-commerce startup investment could persist if investor caution remains prevalent. Nevertheless, the long-term outlook for the African e-commerce market remains positive. Valued at $317 billion in 2024, the market is projected to surge past $1 trillion by 2033.
With increasing internet penetration across the continent and evolving consumer preferences, the fundamental drivers for growth in this sector are robust. The current investment slowdown may therefore represent a necessary recalibration, pushing startups to refine their business models and focus on sustainable growth, ultimately leading to a more mature and resilient e-commerce ecosystem in Africa.