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Kenya’s startup ecosystem is set for growth in 2023 and beyond

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by Patrick Ndegwa, SEACOM Business Sales Lead for SEACOM East Africa

Kenya is a hub for entrepreneurship and startup development in East Africa, with a growing ecosystem of innovative businesses and supportive infrastructure. According to the recently released Partech Africa Tech Venture Capital Report for 2022, Kenya is among the top three African countries for startup activity and investment, alongside South Africa and Nigeria. Nairobi is the centre of Kenya’s startup ecosystem as one of the leading startup cities on the continent, alongside Cairo, Cape Town, Lagos, and Johannesburg. Of the Kenyan tech startups tracked in the report, 97.4% are based out of Nairobi.

As we look to the remainder of 2023 and beyond, several factors suggest that the country’s startup ecosystem is set for continued growth and success.

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Mobile and digital infrastructure as key drivers of startup success in Kenya

One of the key drivers of Kenya’s startup growth is our rapidly expanding digital infrastructure. With 17.86 million Internet users in Kenya at the start of 2023 and a growing number of people accessing the Internet through smartphones, Kenya has become a hotbed of digital innovation. A total of 63.94 million cellular mobile connections were active in Kenya in early 2023, equivalent to 117.2% of the total population. This has led to the emergence of numerous successful startups such as Snark Health, Kiotapay, and FaidiHR.

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Government support for a business-friendly environment

Our government has played a role in supporting the growth of the startup ecosystem. There has been a concerted effort to create a more business-friendly environment, with initiatives such as establishing the Kenyan Investment Authority, which is tasked with promoting and facilitating investment in the country. The government has launched several programmes to support young entrepreneurs, including the Youth Enterprise Development Fund and the Kenya National Innovation Agency.

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A young population spurs innovation

Another key factor driving the growth of Kenya’s startup ecosystem is the country’s young population. With a median age of just 20 years old, Kenya has one of the youngest populations in the world. With the Kenyan government providing education services for over 16 million children and youth, primary education is reaching universal levels, while secondary school enrolment increased by over 50% in the seven years before the pandemic. These achievements in the education sector are a step in the right direction to creating a pool of talent well-suited to driving innovation and entrepreneurship.

Growing venture capital investment landscape

Our startup ecosystem is also benefiting from an increasingly vibrant investment landscape. There has been a surge in venture capital investment in the country, with both local and international investors showing increasing interest in the Kenyan startup scene. This has led to a growing number of successful startup exits, including the acquisition of digital payments company DPO Group by Network International in 2020 for $288 million.

Kenyan tech startups raised US$291 million in funding in 2021, representing a 52% increase from the US$191 million raised in 2020. This figure is expected to continue to rise in the coming years. The Kenyan Startup Ecosystem Report 2022 supports these numbers, showing that the Kenyan startup ecosystem continues to grow steadily, with more than 300 startups founded in 2021 alone.

But, as most startup founders know, the use of technology is an essential factor that can influence startup success. Ranging from the basics, such as quality hardware, reliable Internet connectivity, and access to cloud storage, to cloud-based accounting software and other SaaS services, startups can turn to a variety of technologies available to them that will help them thrive in a competitive business context.

Kenya’s thriving startup scene: A beacon of hope for entrepreneurship

Startups need to invest in the right technological tools to succeed in today’s digital world. The use of technology can help them streamline operations, improve customer satisfaction, and boost growth. It is essential to embrace technology from the very beginning, and businesses that do so will have a competitive edge over others in the market.

With innovative startups emerging in key sectors such as agri-tech, fintech, and e-commerce, the future looks bright for entrepreneurship and innovation in Kenya. As investors and entrepreneurs alike look to tap into this exciting ecosystem, we can expect to see continued growth and success in the years to come.

ENDS

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