E-commerce Startups in Africa Struggle as Q1 Funding Falls

Funding Slows Amid Investor ConcernsInvestor enthusiasm for e-commerce startups in Africa is starting to fade. In the first quarter of 2025, total funding fell sharply to $11.3 million, down from $21.4 million in the same period last year. That’s a 47.2% year-on-year dip, according to fresh figures from Africa: The Big Deal, a trusted tracker of African startup investment.

The cooling trend is driven by heightened caution in private markets. Investors are taking a hard look at the challenges facing the sector, especially around competition, profitability, and long-term growth. With so much uncertainty, they’re now leaning towards industries with more predictable returns.

Notable Deals, But Smaller Bets

Despite the downturn, a few deals still made headlines. Egypt-based Taager, a social commerce platform that assists online merchants with logistics, landed $6.8 million in a Pre-Series B round led by Breyer Capital. Similarly, Kenyan grocery startup Kapu, which offers a group buying model, secured $2 million from Base Capital in a Pre-Series A raise.

But these wins are not enough to disguise the broader slowdown. The average ticket size shrank compared to Q1 2024, and perhaps more telling is the complete absence of seed funding rounds. Last year, startups like Badili and Dawa Mkononi had pulled in $3 million at the seed stage. This year, early-stage founders were left out in the cold.

Hard Times for Digital Retail

E-commerce startups in Africa are battling more than just wary investors. The market is crowded, with major players like Jumia, Zando, and Konga making it increasingly difficult for newcomers to grab meaningful market share. On top of that, the cost of acquiring customers is rising steadily, putting pressure on already thin margins.

Investors appear to be shifting focus from high-risk, high-growth ventures to startups with solid unit economics. The result? Fewer cheques and a tighter path to survival for e-commerce hopefuls.