How to sustainably finance Kenyan startups

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How to sustainably finance Kenyan startups


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summary

  • Despite the impact of Covid-19 on many businesses in our country, one area in which Kenya has been documented as the leader on the continent is that of startups.
  • Kenya replaces Nigeria, South Africa and Egypt to become the number one destination for total capital raised combined in 2020.
  • The 2020 annual report on funding African tech startups clearly highlighted this. He said Kenyan tech startups have managed to raise a record 19.1 billion shillings.

Despite the impact of Covid-19 on many businesses in our country, one area in which Kenya has been documented as the leader on the continent is that of startups. Kenya replaces Nigeria, South Africa and Egypt to become the number one destination for total capital raised combined in 2020.

The 2020 annual report on funding African tech startups clearly highlighted this. He said Kenyan tech startups have managed to raise a record 19.1 billion shillings. Not everyone was happy.

Ciku Kimeria’s article in Quartz Africa from June 25, 2021 titled “White Founder’s $ 1 Million Food Startup in Nairobi Aims to Solve a Problem Kenyans Say Doesn’t Exist,” said frenzy Kenyans on Twitter (KOT).

The bone of contention was a comment from Robin Reecht, a French investor in Kenya who was interviewed by an online American high-tech newspaper focused on start-ups. While explaining how he was able to invest in a Nairobi-based food start-up, he reportedly said: “After three days in Kenya, I asked where I could find good food at a cheap price, and all. everyone tells me (sic) it’s impossible.

“It’s impossible because you either go to the streets and eat street food, which is really cheap but with not so good quality, or you order on Uber Eats, Glovo or Jumia, where you have quality but you have to pay at least $ 10. “

He concludes that it is this experience that led him to found Kune, the start-up which offers “cooked meals at affordable prices and distributes them to individuals and businesses” and that he had already raised $ 1 million. in pre-seed financing.

It was this last comment that seemed to infuriate many KOTs, some of whom have had first-hand experience of trying to raise pre-seed funds without success. They complained about what they considered to be “white privilege”.

The concept, however, has its history in the struggle for civil rights in the United States. In the 1930s, American historian and civil rights activist WEB Du Bios described the concept of “psychological wages” that made poor whites feel superior to poor blacks.

The use of the term “white privilege” in independent Africa masks the progress the continent can make by focusing on context-specific issues and leveraging the social networks of foreign investors to promote the Africa destination.

One clear thing we can learn from this is that it doesn’t matter who was the actual recipient of the funding since we are not entitled to it. The owners of capital can do what they want with it. But we can see how the country has benefited from it. The optics of attracting venture capital, allowing foreign currency inflows, creating jobs and facilitating the transfer of knowledge in the many startups in the country can be some of our main achievements.

Maybe also look inside and depend less on others. However, this requires self-discipline with one key objective in mind: how to sustainably attract venture capital funding flows. This might force us to take a closer look at our beliefs. For starters, you have to contend with a few bad apples that have diverted venture capital funding, forcing some to suspend their activities in Kenya.

We also lack the rule of law, with litigation dragging on in the courts. We need to tone down nationalistic sentiments that could undermine angel investors and deal with these variables of mistrust or even lose what we have right now. Investors rely on networks to ensure they minimize their exposure. Any default by locally funded startups, and it has happened before, could lead to widespread funding dilemmas – which I suspect to be the case – for future startups.

In my opinion, instead of blaming white privilege, local startups should form a strong association with strong ethics. There is no need for strong nationalist sentiments. Such attitudes rarely help solve the immediate problem of funding startups in Africa. The future success of startups depends on our collective willingness to build confidence and facilitate government interventions to minimize risks for foreign and local venture capitalists.

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About Bradley J. Bridges

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