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New taxes, protests cut Kenya’s startup funding by Sh20 billion
In Kenya, at least three startups have just recently either gone into administration or ceased operations completely, after failing to raise follow-up funding to sustain their activities.
Venture Capital (VC) funding to Kenyan startups dropped by Sh20 billion ($155 million) in 2024, new data shows, as political tensions and new taxes spooked international investors and stalled the growth of local companies.
Kenya, which was in 2023 the second highest recipient of startup funding on the continent after South Africa, has now been relegated to fourth place following the steep drop that allowed Nigeria and Egypt to overtake it as more attractive investment destinations.
In 2024, Kenyan startups received only Sh41.4 billion ($318 million) in capital funding from both local and international investors, a 33 percent decline from the Sh61.5 ($473 million) billion received in 2023, latest data from the African Venture Capital Association (AVCA) shows.
This is the first time since the pandemic slump that Kenya has posted a drop in VC funding, and the continental lobby attributes it to the socio-political unrest marked by protests witnessed last year and a raft of new taxes that have dulled investment morale.
“A volatile socio-political climate in Kenya and regulatory changes related to the proposed Finance Bill 2024 led to a 7.6 percent decline in new business registrations and weighed on deal flow,” said AVCA in a report assessing venture capital activity on the continent in 2024.
The number of VC funding deals posted last year also declined from 75 to 60, meaning that the average value of the transactions declined from Sh819 million to Sh689 million, indicating falling investor confidence.
Continentally, the total value of funding attracted by startups shrunk by 30.7 percent to Sh583 billion ($4.5 billion) from Sh842 billion ($6.5 billion) in 2023, indicating a general slump in funding coming into Africa.
All top four startup countries – South Africa, Nigeria, Egypt and Kenya – recorded a decline in startup funding last year, sending a number of budding companies into insolvency due to scale-backs to sustain operations.
In Kenya, at least three startups have just recently either gone into administration or ceased operations completely, after failing to raise follow-up funding to sustain their activities.
Examples include fintech startup Lipa Later, e-commerce firm Copia Global and mobility firm Mobius Motors, which has since been purchased by Dubai-based investment firm Silver Box in a bid to salvage its operations.
Others are agritech startups iProcure – which filed for bankruptcy last May after failing to raise follow-up funding – and Gro Intelligence, which shut down in June 2024 due to failure to raise more capital to continue operations.
Contrastingly, startup funding to other parts of the globe increased last year, hitting Sh40.6 trillion ($313.6 billion) from Sh36.9 trillion ($285.2 billion) in 2023, pointing to falling investor confidence in African firms in favour of others outside the continent.
