NAIROBI, Kenya, March 24 – The lack of access to investors, the reliance on international VCs, and global recession trends are the biggest threats to the growth of East African startups, a new survey shows.
The survey entitled, ‘A Deep Dive into East Africa’s Start-up Ecosystem: Challenges & Opportunities’, revealed that whilst investment levels remained relatively stable over the last twelve months, the heart of Africa’s start-up ecosystem perceives many roadblocks as having the potential to disrupt the region’s growth trajectory.
“Whilst there is huge tech potential in the region, the roadblocks need to be addressed for the region to maintain its competitive edge as a tech start-up powerhouse,” the survey stated.
The survey found that access to funds over the last 12 months remained relatively stable compared to the previous period, as 25 per cent of respondents indicated that year-on-year investment levels remained similar.
On the other hand, 25 and 19 per cent of respondents indicated respectively a slight increase and a slight drop in investment levels.
“Although 28 per cent of respondents indicated that Covid-19 had slowed down investment levels across the East African start-ups landscape, making it the largest impacting factor for those young businesses, 17 per cent of answers collected indicated that the pandemic had also boosted the digitalisation journey of the region, with a potential to create more opportunities for tech start-ups across the board,” the survey notes.
Further, the survey showed that the region remains a dynamic hub for start-ups noting that 74 per cent of tech start-ups only needed to meet up to 5 investors before securing funds.
The number drops even further for seeds businesses as 52 per cent of them needed less than 3 investors before securing new investments.
By contrast, 22 per cent of series B businesses only managed to access new funds after reaching out to more than 10 different investors.
The survey unveils that the top three priorities of funding allocation focus on investing in equipment (26 per cent), entering new geo markets (21 per cent), and developing products (16 per cent).
Scale-ups especially put a strong emphasis on business expansion as 35 per cent of them use funds to expand to new geographies.
Positive developments are also underlined as part of this exclusive report, with many opportunities for growth being identified by start-ups.
The report highlights that greater networks of supporting incubators (57 per cent), a widening of the pool of industries receiving funds (56 per cent) as well as the rise of local VCs / funding opportunities (55 per cent) all represent excellent prospects for growth for East African tech start-ups.
The report also highlights that 74 per cent of respondents identify sustainability as very relevant for their business mission.
