Kenya dominates as Eastern Africa startups raise $2.3bn in 3 years

Kenyan startups raised $1.935 billion in funding between 2019 and May 2022, making the ‘Pride of Africa’ the dominant destination for tech investors in Eastern Africa.

This is just as the region (Eastern Africa) raised $2.3 billion in the same period under review, based on a new report by Africa: The Big Deal.

According to the report, 84% share of the funding realised by the region went to Kenya during the period. Five other countries shared the remaining 16%: Sudan ($6m), Ethiopia ($46m), Uganda ($125m), Rwanda ($23m), and Tanzania ($152m).

On another note, the Eastern Africa region attracted 23% of the total funding that came to Africa during the period. This is despite a slight dip in 2021 (-12% YoY).

In 2022, the region has had a solid beginning. Startups in the region have already raised nearly $850 million (as of May 31), which is already more (50% more actually) than they had raised in the whole of 2021. The vast majority of the funding raised in Eastern Africa goes to Kenya – $784 million.

With a particularly strong start of 2022 ($780m+ raised between Jan and May, a +436% increase YoY), it (Kenya) is dominating the region even more than in previous years (93% of all funding in 2022 so far).

Africa: The Big Deal

Of the 10 $50m+ deals recorded in Eastern Africa since 2019, 9 went to Kenya (the only outlier is Tanzania’s Zola Electric’s $90m round of September 2021). 

Other highlights:

• Tanzania and Uganda are the only other two markets to have attracted more than $100 million in total funding since 2019. Tanzania has raised $152 million; Uganda has attracted $125 million in funding.
• The trio of Kenya, Tanzania and Uganda shared 96% of all the funding raised in the region since 2019 (99% in 2022 so far), leaving just 4% to the remaining 11 Eastern Africa countries.
• In 2019, the region gained 19% – $255 million – of the total startup funding that came to Africa. 
• Despite the COVID-19 health crisis in 2020, the region amassed $646 million (38%) in funding.
• The figures dropped to half a billion bucks – $571 million – of the total funding for the African continent in 2021. This is about 13% of the total funding. 
• As of May 31 2022, the region has raised $845 million. That’s 31% of funds attracted by Africa within and beyond so far this year. 

Focus on Kenya

The ‘Pride of Africa’ attracted 72% ($185 million) of the total funding for East Africa in 2019. The figure almost tripled in 2020, with Kenyan startups accounting for $553 million in funding. This represents an 86% share of the total funding that year. 

A year later, the country raised $413m (72%) in startup funding. But this represents a $140m drop from the previous year. The year 2022 has been good for the country, with startups raising 93% ($784m) of the total $845m. 

The dominance factors

According to VC4A, a network committed to building Africa’s startup community, Kenya is a leading hub for entrepreneurship on the continent because of a growing number of engaging international investors, a huge population with access to technology, and a growing number of startup support organisations active in the ecosystem.

Also, Kenya has arguably one of the most mature tech ecosystems on the African continent, with an emerging local venture capital industry. The growth has been driven by a couple of factors including

(i) investment from corporate Kenya in accelerators, incubators and innovation programmes

(ii) investment from the government (local and international) in innovation funding and

(iii) a growing community of successful investors, entrepreneurs, and growing track record of exits.

Conclusion

It’s six months into 2022, but Eastern Africa has shown so much promise for growth. With Kenya leading the pack, it will be interesting to see more tech ecosystems play the catch-up game.

Ultimately, more funding for the region and favourable policies will inspire the addition of new jobs and wealth creation by players and investors alike.