Over the past decade, Startup Capital in Kenya has predominantly come from the West. 90% of the funds (GPs) operating in East Africa are set up as outfits to manage capital from external LPs (Limited Partners), mostly Delaware based. However there seems to be shift towards unlocking local capital. Initiatives such as is I3N - Intellecap’s Angel Network and Viktoria Ventures are setting the pace for unlocking local capital from high net worth individuals. According to Angel.co there are about 1190 angel investors in Kenya with investments valued at about $3.7mn (pre-money). Compared to traditional asset classes like real estate, we have barely scratched the surface in unlocking angel investments potential in Kenya. In 2017 for example, the value of new private buildings increased by 10.2 per cent from KSh 77.7 billion in 2016 to KSh 85.6 billion ($0.9 billion dollars), mainly on account of a 9.7 per cent increase in the value of residential buildings – source KBNS.

There are a few things we could to as a country. Firstly, we need to tap into the diaspora community who have always shown interest in investing back home.  The African diaspora are estimated to remit back home about Sh160 trillion ($160 billion USD) annually. In 2018 Kenyans' Diaspora Remittance for 2018 Grew by 39% to 274.37 Billion Shillings.Kenyans in the diaspora remitted a cumulative 274.37 billion shillings in 2018which was a 39 percent increase from 2017's 198.07 billion shillings ($2 billion USD) according to the Central Bank of Kenya's (CBK) weekly bulletin. One way to tap into this would be through accelerator programs that offers startup linkages to diaspora money. Other options would be organizing the diaspora community into an angel network or alternatively pooling their resources into a fund with a dedicated fund manager.

There are immense learnings to be borrowed from other emerging startup ecosystems like India, Brazil and Israel. In India for example the first tech wave in early 2000 created many self-made entrepreneurs in the Business Process Outsourcing space the likes of Infosys. Many of them went on to become angel investors in the second tech wave that created startups like Flipkart, Zomato, MakeMyTrip and many others. In 2014 for example Kris Gopalakrishnan became the first Infosys co-founder to join an Indian Angel Network. Kris (as his colleagues call him) went on to make 18 investments into startups like Verloop, Hungerbox among many others according to his Crunchbase profile. He is also a co-founder of Axilor Ventures, an early stage seed fund and startup accelerator that invests in supports Indian tech startups.  Kenya could borrow a leaf from India and start converting successful entrepreneurs from older generation of entrepreneurs the likes of Chris Kirubi and Manu Chandaria into angel investors.  We could also tap into more recent success stories from the younger generation of entrepreneurs who have turned startups like Cellulant, Jambo Pay, Mkopa and MODE into unicorns. These younger generation will not only bring in capital but also a wide range of startup experience.

The Government also has a role to play in catalyzing angel investments by creating conducive environment and favorable tax incentives on capital gains from angel investing activities. The recently created association of startup enablers (ASSEK) could be one forum through which we can engage the government at a policy level and also start rethinking ways to unlock local capital. As a member of ASSEK, Villgro Kenya is going to play a proactive role in shaping the future of the Kenyan Angel Investment Ecosystem.  As a Kenyan company Villgro Kenya is taking baby steps towards initiating discussions with the Kenyan Diaspora through employees’ personal networks since 40% of the team has either worked or studied abroad. We aim to engage directly with diaspora associations as we gauge their level of risk appetite for angel investing. These early discussions will inform us on the best approach to unlock the diaspora money.

By Wilfred Njagi - Villgro Kenya COO