Understanding East Africa’s Startup Investment Ecosystem

By Carlos Onyango

The number of startups from the East African Community members raising millions in capital is set to further increase as many are scaling up and looking for alternative sources of funding worldwide.

In the past, the perception of Africa by the rest of the world was always negative. Tech entrepreneurs are, however, gradually becoming the face of the continent with groundbreaking success stories as well as solutions that not only address local problems but also meet international needs.

One of the major benefits of investing in startups is the immense potential for huge returns. The investors who can lean on the investment opportunities in the African startup ecosystem will most likely smile all the way to the bank.

The former United States president, Barack Obama, in his recent visit to Kenya affirmed that Africa is one of the fastest growing regions in the world even as he praised the continent’s economic advancement.

The reason for an increase in the number of startups can be associated with the large pool of educated young people, coupled with the inadequate formal employment opportunities which have resulted in breeding both creativity and entrepreneurship in the region.

In 2018, the number of startup funds that crept into Kenya were about 350 million. Rwanda got about 75 million of funding while Uganda only garnered 2 million in startup funding.

READ ALSO: How the Government of Kenya Can Help Empower Start Ups

Apparently, most startups are in the ICT sector, the FinTech sector, and agri-business, while fewer investments are done or made in traditional agriculture. Though Africa depends mostly on the agricultural sector, this is a little blow to it as the IT sector is growing rapidly and Africans are embracing technology at a faster rate, thus making IT one of the best sectors in which to venture.

According to Michelle Mboha, Financial Economist and a Growth Catalyst at Growth Africa, the number of incubation hubs has doubled in East Africa. Investments in Africa startups also doubled in the year 2018.

Some promising African startups have received startup capital and have made names for themselves, attributable to amazing success stories and tractions.

But startup investors may do some mistakes that may affect their performance. Mboha attributes these mistakes to lacking contract provision, evading taxes, or lacking tax clearance certificates. To save yourself from such mistakes, you should have clear and achievable goals towards the future.

One should be able to convince investors how big their business is or would be with SMART objectives. Your vision and mission should come out clearly. There is a reason why an entrepreneur would want to leave Africa and go to start a business in other continents where they’ve seen an opportunity while those in foreign countries would want to do the same. The bottom line is that they have seen an unutilized opportunity. But it all solely depends on the end results.

Irrespective of the challenges, however, the success stories in the industry over the last couple of years have proven that it is possible to run a successful business.

READ ALSO: Highest Funded Startups in Kenya in the First Half of 2018