Why it’s important to embrace startups, bring funding closer - The Citizen

Why it’s important to embrace startups, bring funding closer

Thursday April 18 2019

 

By Salum Awadh

Tanzania has been experiencing incredible GDP growth rate averaging at 6 per cent over the past 10 years, this has led to the transformation of many sectors including telecommunication, banking, road infrastructure, real estate, and many more.

But this growth has remained at macro and corporate level, with many start-ups still struggling to make it in the mainstream.

Starting and growing a start-up is a tough journey across many African countries, if not all. With some exceptions in South Africa, Nigeria, and Kenya, which have done a wonderful job in growing the start-up ecosystem, especially in the tech space, and attracting more than 60% of all funding coming to the continent.

Tanzania, the second largest economy in East Africa, is still in its early stage of growing a robust start-up ecosystem that will create formidable start-ups, sustainable innovation spaces, and readily available venture capital and angel investors funding.

Where are these start-ups?

We have seen great efforts in starting innovation hubs in the country, some not existing anymore, and some showing great hope and maturity in terms of building the future “Africa-made unicorns”.

But what happens when these hubs and accelerators do their job right? Is their funding ready to take these start-ups to the next level? We know we can’t talk of banks, neither can we speak of VCs, as this is too early for them.

What is the landscape of early stage start-ups?

Fintrek report by EAVCA and partners published early this year indicates that between 2010 and 2017, Tanzania raised $0.8 million only, while Kenyan-based Fintech, for example, raised $204 million for the same period. This requires aggressive interventions to bring this money home.

How can we bring these investors closer?

Tanzania Venture Capital Network is one of the initiatives expected to improve the situation by mobilizing local and foreign capital for both early and late stage investing.

For early stage, local investors, the network seeks to mobilize financial resources from local successful entrepreneurs and executives, Tanzanians living in diaspora, formal and informal savings schemes, and international angel investors interested in the market.

Among the other things, the network helps investors with the following;

• Deal sourcing

• Deal preparations

• Due diligence

• Preparing all investment and legal documents

• Monitoring the investments have been committed

• Supporting the investors with exit

Conducting these activities will help the country embrace the start-ups that are ready for investment, and bring these investors closer in investing in these start-ups.

Salum Awadh is a CEO of SSC Capital, a corporate and investment advisory firm based in Tanzania and Rwanda , offering capital raising services, M&A, Corporate advisory, research and feasibility studies, business development, funds management, and development advisory

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