Not long ago, running a mid-sized business in Africa that is profitable and ambitious, but too small to catch the eye of global financiers, often meant being stuck. Banks wouldn’t extend meaningful credit without hard collateral, and Venture capital sought hypergrowth and buzzy fintech and e-commerce companies. And traditional private equity? Too busy building infrastructure portfolios.
That left a gaping hole in the middle of the market. And in many ways, it still exists. But it’s shrinking.
Private equity firms are waking up to a truth that African entrepreneurs have long understood: the continent’s mid-market is the real engine of real economic transformation, but it is greatly underserved. These are the businesses hiring local talent, processing raw materials, and building regional supply chains.
Now, PE firms are beginning to drive private capital into the mid-market, not because there is no risk like in other market segments, but because PE firms are learning how to manage risk on their terms.
And the investment is growing. Private capital fundraising in Africa reached USD 4.0 B in 2024, per data provided by the African Private Equity and Venture Capital Association (AVCA) 2024 report. Of that, private equity (PE) funds accounted for USD 1.2 B—30% of the total, surpassing the USD 0.7 B raised by venture capital (VC).
Interestingly, much of this capital is skipping the usual VC darlings and large corporates, flowing instead into the mid-market, where the average deal size falls between USD 20 M to USD 50 M.
This represents patient, catalytic capital designed to provide established businesses, those already moving product, and making payroll, the time and resources to unlock scale and fuel aggressive growth with the clear potential to double or triple their current size.
But beyond just providing capital, it’s how it’s being deployed that matters, and this is where the derisking comes in.
Building the Market, Not Waiting for It
The African startup landscape is complicated. Mid-market businesses face a grind of challenges that stifle growth—limited capital, currency swings, and fragmented regional markets. So, rather than wait for perfect market conditions, African-focused PE firms are stepping in to build the conditions themselves. They’re structuring their support in ways institutional banks or even Venture Capital (VC) firms don’t – by actively derisking these businesses.
And one of those ways is how they provide capital. The available capital, mostly from VCs, often came with terms that added pressure rather than removed risk; short timelines, high burn expectations. Without capital that’s designed to absorb shocks and support long-term growth, many of these businesses were forced to play it safe or stay small.
