- For many entrepreneurs, finding funding has become a challenge. Not because Africa lacks funders, but because of a lack of awareness of what business startup finance is available
- Last year, entrepreneurs raised $1.1 billion in equity. This year, it’s projected that venture capital funding will raise over $1.5 billion for new companies
- Today, there are over 442 active tech hubs in the region
- The African Development Bank and the governments of Spain and Denmark partnered to create the African Guarantee Fund
- International Finance Corporation and Ecobank provide cover for SME risks of up to $110 million in war-torn countries in West and Central Africa
African governments have begun huge business and regulatory reforms in the last few years, making East Africa a friendly place to start up a company. But for many entrepreneurs, finding funding has become a challenge. Not because the region lacks funders, but because of a lack of awareness of what business startup finance is available.
If you’re from, living in, or foreign to East Africa, you need finances to launch a business idea. You can do one of the following:
Approach reputed venture capitalists
Venture capital funding has grown at a tremendous pace in Africa. Last year, entrepreneurs raised $1.1 billion in equity. This year, it’s projected that venture capital funding will raise over $1.5 billion for new companies.
If your business involves low-cost innovations, then VCs are the best people to approach for immediate financing. Some of the biggest VC’s in East Africa are Dotun Olowoporoku, Mehak Malik, Muthoni Wachira, Takuma Terakubo, and Justin Stanford.
Register with an experienced incubator
Incubators provide financial support, but they also give startups marketing know-how, technological support, and strategic advice. In East African countries like Uganda, where agriculture is the primary source of income, agribusiness incubators have allowed entrepreneurs to grow better-quality produce at a fraction of the cost.
Many such incubators across Africa provide support for businesses across industries. For example, HiveColab, Co-Creation Hub, BongoHive, ActiveSpaces, and RLabs, amongst others, provide training, financing, and operational support to entrepreneurs.
Seek help from accelerators and tech hubs
East Africa has become one of the fastest-growing tech industries in the world. This is leading to an increase in several accelerators and tech hubs that have been set-up to cater to startup needs. The hubs and accelerators provide financing, advisory, and operational support to help entrepreneurs achieve business success.
Today, there are over 442 active tech hubs in the region. These include reputed hubs like IceAddis, Impact Hub, AlphaCode Club, Orange–Start on, and iSpace. There are many accelerators too, which offer finance for startups at different stages. These include SW7, EY Business Accelerator, Barclays Accelerator Program, Passion Incubator, and Grindstone Accelerator.
Take advantage of government schemes
The number of government grants and incentives offered by African governments to its entrepreneurs is increasing every day. More governments are partnering with local developmental banks to secure seed capital for startups and existing businesses. Foreign investments are being sought through investor citizenship programs and the World Bank aid.
The African Development Bank and the governments of Spain and Denmark partnered to create the African Guarantee Fund. This can provide credit to startups, which otherwise find it difficult to get investments. The International Finance Corporation and Ecobank provide cover for SME risks of up to $110 million in war-torn countries in West and Central Africa.
Entrepreneurs interested in starting a healthcare business are eligible to apply for the Johnson and Johnson Africa Grants Programme. This covers all the costs of setting up a business in Africa. There are also grants from the Jana Robeyst Trust Fund, dedicated to scientists, conservationists, and NGOs for research and business.
Use Mobile Loans
Nowadays, mobile-based financial services have brought significant changes in how money is transferred and saved in Africa. Most people do not know that mobile cash services also provide micro-loans. These offer a great opportunity for startups as they can secure small loans easily and quickly.
In Tanzania and Kenya, M-Pesa is the most well known and trustworthy mobile finance application. Another application is M-Pawa which has been designed with co-operation from local banks. Users must have a mobile bank account to deposit funds and use the service. In Uganda, the Commercial Bank of South Africa and MTNU telecom have launched a loan service, MoKash.
Entrepreneurs can also use grants or awards to meet their objectives. Here are some awards for African business initiators:
- Anzisha Prize
Is specifically designed for African investors who are young and between the ages of 15 to 22 years. The prize is given to support businesses who work to accomplish social needs and have the capability to create new jobs. Finalists are given a chance to visit African countries for 7 days. Winners receive a prize worth US$75,000.
- Savannah Fund
This has been launched for mobile and web beginners in Africa. The winners are given prizes ranging from US$25,000 to $500,000 and an internship with companies in South Africa and Silicon Valley.
- SEIF Awards
Social EntrepreneurshipImpact And Finance Awards are credited as an opportunity for social startups worldwide. Entrepreneurs and professionals are welcomed to join the competition. Winners are given a prize worth of US$10,400. The SEIF Awards website gives competition tips on how to win the award.
Community Savings Groups
Saving groups are a get-together of concerned people who offer their money to support individual startups succeed. They also generally provide a platform for entrepreneurs to get advice about business decision-making and economic planning. Group meetings are arranged from time to time, and all the community members contribute money to a savings account.
Members are encouraged to launch business ideas, and receive loans to start community-based projects, increase their business size, or renovate homes or stores. Loans are given according to a set of conditions which are approved by the members of the group. In East Africa, community loans are repaid with interest to increase the overall total amount of group funds so more can be given to future projects. After one year, the total amount is equally divided amongst the group members.