Data from American online platform Substack shows that funding for young local firms fell to $411 million (Sh46.5 billion) last year from $549 million (Sh62.2 billion) in 2020.
Kenya’s start-up ecosystem’s poor performance came after the country’s ranking on deals of over $1 million (Sh113 million) raised in Africa fell from position one in 2020 to fourth last year.
Funding of Kenyan start-ups by international investors declined by Sh15 billion last year amid a fall in the number of deals valued at more than $1 million (Sh113 million).
Data from American online platform Substack shows that funding for young local firms fell to $411 million (Sh46.5 billion) last year from $549 million (Sh62.2 billion) in 2020, representing a 25.1 percent drop.
Kenya’s start-up ecosystem’s poor performance came after the country’s ranking on deals of over $1 million (Sh113 million) raised in Africa fell from position one in 2020 to fourth last year.
“Kenya had a particularly strong 2020, topping the table but failed to continue at the same levels in 2021,” the Substack report says.
“2021 tells a more contrasted story as the country dropped to fourth in terms of the number of $1 million deals and fifth in total amount raised.”
Last year’s plunge came after Kenyan start-ups recorded a funding growth record of Sh62.2 billion in 2020, up from Sh20.85 billion in 2019.
Nigeria led venture capital (VC) investments in Africa with $1.5 billion (Sh170 billion) last year. South Africa followed at $945 million (Sh107.1 billion) and Egypt $599 million (Sh67.8 billion).
“Nigeria showed a slump in 2020 but rebounded massively in 2021, driven by a few strong mega deals,” the report noted.
Kenya is home to several start-ups such as Twiga Foods and Komaza, among others, attracting billions of shillings annually from international investors.
The most active investors in the continent are Launch Africa with more than 44 deals, Kepple Africa (32), Y Combinator (27), LoftyInc Capital (23) and Flat6Labs (19).
Last November, for instance, Twiga Foods, which supplies fruits, cooking oil and snacks through a mobile-based platform, raised Sh5.56 billion from international investors such as Creadev, OP Finnfund Global and Endeavor Catalyst Fund, among others, for East and West African expansion.
Like in the developed world, most of the start-ups being funded in Kenya and other African markets are in the technology space.
The growth of Internet connectivity has enabled innovators to come up with new solutions for problems in various areas such as payments, marketing, entertainment and transportation.
Investors are attracted by the potential of the solutions to be developed at scale and with minimal incremental costs through mobile apps or computer software.
