Clean Energy Attracts Billions While Other Founders Run Out of Runway in a Tightening Funding Climate

Venture capital tends to carry a story about expansion. More deals, more founders, more ideas entering the market. Yet the numbers coming out of Kenya’s startup ecosystem in 2025 tell a more complicated story, one where funding grew in volume while narrowing in reach.

Out of Sh141 billion raised by Kenya-based startups last year, Sh98.5 billion flowed into four companies. The concentration was not accidental. Investors gravitated toward businesses already operating at scale, particularly those tied to energy access and climate-linked infrastructure. The result is a funding landscape that looks strong on paper while feeling uneven beneath the surface.

This is not unusual in emerging markets. Capital often seeks familiarity when global conditions tighten. What stands out is how sharply the balance tilted, and how quickly that tilt became visible across the ecosystem.

Clean Energy as the Safe Bet

The four largest recipients of funding, Burn Manufacturing, Spiro, D.Light, and Sun King, sit squarely within the clean energy and electrification space. Their appeal is straightforward. Demand is measurable. Revenue models are increasingly predictable. Development finance institutions and climate-focused investors understand the risks.

D.Light alone raised Sh39 billion in debt financing, largely from the French investment fund Mirova. Sun King followed with Sh35 billion through a mix of debt and equity, drawing backing from the International Finance Corporation and London-based investor Lightrock. Burn Manufacturing secured Sh11.6 billion, much of it from the Trade and Development Bank, while electric motorcycle financing added Sh12.9 billion across manufacturers.

These are not early-stage bets. They are capital-intensive operations tied to physical distribution, hardware financing, and long repayment cycles. Investors appear more comfortable funding expansion than experimentation. Energy access has become less of a startup narrative and more of an infrastructure story.

A Strong Headline Number, a Narrow Base

Kenya retained its position as Africa’s largest destination for venture capital funding in 2025, ahead of Egypt, South Africa, and Nigeria. On the surface, that reinforces the country’s long-standing reputation as the continent’s startup hub.

But the composition of that funding tells a different story. Financial technology continues to dominate in peer markets, spreading investment across multiple companies and stages. In Kenya, capital has become more selective, clustering around firms already aligned with climate finance priorities.

This creates a paradox. The ecosystem appears healthy from aggregate figures, yet many founders describe a harsher fundraising environment. More deals were recorded in 2025, 65 compared with 60 in 2024, but the distribution of capital within those deals became more uneven.

In practice, this means visibility without access. Startups remain active, yet follow-on funding has grown harder to secure unless a business fits within investor themes that currently attract global capital.

The Funding Drought Beneath the Headlines

The collapse of companies such as Antara Health, Lipa Later, and Bonto illustrates the other side of the market. These closures were not caused by lack of demand alone. They reflected a tightening environment where early growth no longer guaranteed continued backing.

Over the past decade, Kenyan startups benefited from investors willing to fund expansion ahead of profitability. That tolerance has narrowed. Investors now expect clearer paths to revenue and stronger balance sheets, particularly as global interest rates and currency pressures reshape risk calculations.

The result is a system where scale protects companies while smaller firms face abrupt funding cliffs. The distance between surviving and shutting down has shortened.

Climate Capital and the Politics of Investment

The Africa Venture Capital Activity report published by the Africa Venture Capital Association noted that artificial intelligence and climate-related ventures accounted for more than one-third of tech-enabled deal activity across the continent in 2025. That framing is important. Climate financing is not only about environmental outcomes. It also reflects institutional priorities among development financiers and global funds.

Energy transition projects offer measurable impact metrics alongside commercial returns. That combination fits neatly within the mandates of many large investors. Kenya, with its long-standing focus on off-grid power and clean cooking, naturally attracts this category of capital.

Yet there is an underlying tension. Heavy investment in infrastructure-adjacent startups strengthens certain sectors while leaving others undercapitalized. Consumer platforms, healthcare technology, and logistics businesses often operate without the same access to blended finance or concessional funding structures.

The ecosystem grows, but unevenly.

What Concentration Does to an Ecosystem

Concentration changes incentives. Founders notice where money flows and adjust accordingly. Over time, this can narrow experimentation, as new companies position themselves within investor-friendly sectors rather than pursuing less fashionable problems.

There is also a timing question. The clean energy firms currently attracting large rounds are scaling mature models. Their success reinforces Kenya’s reputation among international investors, yet it does not automatically translate into a broader pipeline of new ventures.

An ecosystem needs both scale and churn. Too much emphasis on a few large winners risks slowing the rate at which new ideas are tested. Too little emphasis on scale creates fragility. Kenya now sits somewhere between those poles.

The coming years will likely depend on whether capital begins to spread again once global funding conditions loosen, or whether the ecosystem settles into a structure where a small number of capital-heavy companies dominate investment cycles.

For now, the numbers point to confidence in Kenya’s clean energy future. They also reveal a market still searching for balance between stability and risk, between infrastructure and invention, between growth that looks impressive in aggregate and growth that reaches beyond a handful of firms.

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