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How to sustainably fund Kenya startups

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Despite the impact of Covid-19 on many businesses in our country, one area that Kenya has been documented to be leading on the continent is in startups. Kenya is superseding Nigeria, South Africa and Egypt to become the top destination of total combined raised capital in 2020.

The 2020 Annual Report on African Tech Startups Funding brought this out clearly. It stated that the Kenyan tech startups managed to raise a record Sh19.1 billion. Not everyone was happy.

Ciku Kimeria’s article in Quartz Africa on June 25, 2021 titled, ‘A white founder’s $1 million Nairobi food startup aims to fix a problem Kenyans say doesn’t exist’, sent Kenyans on Twitter (KOT) into a frenzy.

The bone of contention was a comment made by Robin Reecht, a French investor in Kenya who had been interviewed by an American online high-tech newspaper focusing on startup companies. While explaining how he got to invest in a Nairobi-based food startup, he is quoted as saying, “After three days of coming into Kenya, I asked where I can get great food at a cheap price, and everybody tell me (sic) it’s impossible.

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

He concluded that it was this experience that led him to found Kune, the startup that delivers “ready-to-eat meals at affordable prices and distributes them to individuals and companies” and that he had already raised $1 million in pre-seed funding.

It is the latter comment that seemed to have infuriated many in KOT, some of whom have had first-hand experience trying to raise pre-seed funding with no success. They complained about what they saw as “white privilege.”

The concept, however, has its history in the civil rights struggle in the US. In the 1930s, the American historian and civil rights activist W. E. B. Du Bios described the concept as “psychological wage” that enabled poor whites to feel superior to poor blacks.

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

One clear thing that we can learn from this is that, it does not matter who was the actual recipient of the funding since we have no right to it. The owners of the capital can do what they want with it. But we can see how the country gained from it. The optics of attracting venture capital, enabling foreign currency inflows, creating employment and facilitating knowledge transfer into the many startups in the country can be some of our key achievements.

Perhaps also look inwards and depend less on others. This, however, requires self-discipline with one key goal in mind: How to sustainably attract venture capital funding inflows. This might require us to take a deeper look on our beliefs. For a start, we must deal with a few bad apples that have misused venture capital financing, forcing some to suspend their activities in Kenya.

The rule of law too has failed us, with disputes dragging in courts. We must tone down on nationalist sentiments that could undermine angel investors and deal with these variables of mistrust or lose even what we have at the moment. Investors rely on networks to ensure that they minimise exposure. Any default by locally funded startups, and this has happened before, could result in widespread funding dilemmas — which I suspect is the case — for future startups.

In my view, instead of blaming it on White privilege, local startups should form a strong association with strong ethics. There is no need for strong nationalist sentiments. Such attitudes rarely help to solve the immediate problem of funding for startups in Africa. The future success of startups depends on our collective will to build trust and facilitate interventions by governments in minimising risk for both foreign and local venture capitalists.