Kenya’s Tech Startups Raised Sh61B by November

Funding raised by Kenya’s tech startups almost doubled in 12 months to November, overcoming the global economic slowdown that had put some of them on the brink of collapse, a new report says. 

Disrupt Africa, a startup-focused news and research company, said in the report that by November, tech startups in Kenya had already secured a combined funding of Sh61.82 billion ($506.7 million) , representing a 73.5 percent increase compared to Sh35.62 billion ($292 million) raised in 2021. 

The amount was raised by only 63 Kenyan startups in 2022 and represents a record annual total for the nascent ecosystem, which has attracted over 300 firms. 

“Amidst the recent news of layoffs, shutdowns and pivots, analysis by Disrupt Africa shows that even with the global slowdown, startups in Kenya have (as at the end of November 2022), already raised almost double the total amount raised in 2021,” the report reads in part. 

Since 2015, total investment in Kenya’s startup has so far hit Sh156.16 billion ($1.28 billion) , trailing only Nigeria under Africa’s “big four” countries in the startup ecosystem that also comprises South Africa and Egypt. The startup landscape in Kenya is mainly dominated by the fintech sector, which is by far bigger than e-health and agri-tech platforms. 

The Fintech landscape is believed to be slightly entering a more mature phase amid a slowdown in the entry of new players. New launches of fintech startups dropped to only four in 2022, compared to six in 2021 and 17 new ones witnessed between 2015 and 2020, according to Disrupt Africa. 

The slowdown also comes on the back of the Central Bank of Kenya’s (CBK) move to streamline the digital lending sectors to tame predatory practices.

The fintech sector has been revolutionizing in recent years, from digital lenders to buy-now-pay-later (BNPL) platforms. Some of these platforms are backed by banks and allow customers to spread the cost of items like electronics over three or four months at a given interest rate.

The most popular focus areas for Kenyan fintech startups are the payments and remittances category and the lending space, which cover most fundamental financial services that are still lacking for much of the population. 

There is, however, continued innovation, with new ventures in Kenya targeting emerging markets and themes like climate tech, which aims to slash emissions and remove carbon from the atmosphere.  Financial investors like banks have also been switching their funding to green innovations, helping the tech startups in this category to attract massive funding. M-Kopa, HydroIQ, and Solar Freeze are some of the forerunners in the green tech landscape.  

Despite the vibrant fintech ecosystem and the massive funding, startups are still avoiding being publicly listed on the Nairobi Securities Exchange, further perpetuating the low participation of retail investors.