Investors' Desired Elements in African Artificial Intelligence Businesses
In the first half of 2025, Africa's AI startup landscape is experiencing significant growth, with several startups raising over $40 million in funding. This expansion, while still modest compared to global figures, is a promising sign for the continent's tech sector.
The regulatory environment for AI startups in Africa is still in its infancy, with only 16 countries having released national strategies or policies to support AI innovation. However, venture capital (VC) firms investing in AI-focused startups on the continent are pursuing strategic, hands-on, and long-term approaches to mitigate risk and accelerate growth.
Active, co-founder style involvement is a key element of this strategy. For instance, Nigerian venture studio FirstFounders acts as a co-founder, investing from day one and providing three years of comprehensive support, including product, technical, and legal resources.
VCs are also focusing on AI-driven sectors such as fintech, consumer tech, healthcare, agriculture, education, and sustainability, where AI can address critical needs. Google, for example, has committed $37 million to support Africa's AI innovation, including its latest Google for Startups Accelerator Africa program, which includes 15 AI-driven startups from seven countries.
Building local AI ecosystems is another crucial aspect of the investment strategy. This includes funding research, talent development, infrastructure, and collaborations between startups, researchers, and nonprofits to co-develop AI tools addressing African challenges.
VCs are also targeting mid-stage to early-stage startups with high potential for impact and returns, such as Nosible, a startup that recently raised a $1 million pre-seed round. Atlantica Ventures, an African early-stage VC fund, looks at the full AI stack, from foundational models to infrastructure to customer-facing applications.
However, regulatory uncertainty could discourage investments in AI startups on the continent. There is a need for regulatory sandboxes to allow startups and founders to experiment and innovate within a controlled environment.
In February 2023, Enza Capital, a Nairobi-based VC firm, participated in a $3 million pre-series A round for Widebot AI, an Egyptian-founded AI startup focused on building enterprise-grade language solutions. Similarly, Capria Ventures, a Global South-focused VC firm, invests in African startups with applied AI use cases, rather than companies focused on building AI models and tools.
Meta has also shown interest in African AI startups, having recently concluded a call for early-stage startups developing locally relevant AI applications. UBA Bank's 'Advanced Analytics and AI' team has been encouraged to develop compact, more efficient versions of large language models, known as small language models (SLMs), for application across different departments since the start of 2025.
As the AI startup landscape in Africa continues to evolve, it is clear that VC firms are committed to combining capital infusion with operational partnership, focusing on scalable AI solutions tailored to local issues, supported by ecosystem-building initiatives and strategic international collaborations. This approach is designed to balance risk mitigation with high growth and social impact potential amid a challenging but promising venture capital landscape.
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