Who Funds ICT Start-Up’s?

one entrepreneurs’ experience; I have a business plan and have been looking for funding for over 8 months now. I have been unsuccessful because many financiers are more focused on expansion capital – only if you have been in business for 6 months and over is when you would qualify for capital

I’ll begin by saying that, apart from Enablis, I haven’t found a true venture capital firm anywhere in Nairobi. Although many firms describe themselves as ‘investment banks’, ‘development banks’, xyz Funds, or venture capitalists, for better or for worse, they absolutely do not fund arart-up companies. They like real-life balance sheets rather than projected balance sheets. is already an Enablis member and does qualify for capital, but it’s an 8-16 month long process of reviewing my business plan and then getting funding

Investeq Capital – It’s very impressive; they have offices alongside Milimani Road I think. They seemed to be genuinely interested in my proposal but they said it was too small. If I remember correctly, they fund between Kshs. 5m to 40m. They have a super-skilled management, btw.

Fusion Capital – They fund expansions; you have to have been in business for about 6 months, but I liked their customer service. I didn’t ask about their rates though.

IFC SME centre – Fund expansions. They advertise in the Tuesday newspapers, you’ve probably seen it. Met with them at their offices. Naturally they were not interested so I didn’t get past one meeting, so I don’t know their rates.

Grofin – didn’t meet with them. How they operate is buy you first sending them your proposal, they review it to see if it meets their criteria, and then they respond to you. They told me (over email) that my plan wasn’t up to their standards. It’s generally difficult to argue with such an organization because they effectively cut out your argument. They don’t even bother to meet with you, so you don’t know what it is they found that you could have responded. Another fund I personally know of like this is the APDF but that was a few years ago.

East Africa Capital Partners – They definitely give you time to defend your idea, but it has to be an ICT business. They have big interests in TEAMS and the like and invest heavily in ICT infrastructure. So up to this point they have not looked at small businesses. They are in the process of setting up what they call a ‘special purpose vehicle’ – basically an SME fund. Right idea, wrong time I guess. I’d approach them in 6-8 months if I was an entrepreneur… wait a minute, I am an entrepreneur!?

Banks – Banks were the first entities I approached with my first proposal, but that was some time back before they began lending like crazy. Basically they want you to have been banking with them for at least 6 months, which for me is out of the question. Again, they look at expansions. If he had approached me, I’d have told him we don’t do start-ups, mainly expansions, who have a few years of audited financial accounts

Youth Fund – The fund is broken into two separate funds, one for Kshs. 50,000 and under and the other for Kshs. 500,000 and over. The rules for the bigger fund are obscure. The fund is run by ‘financial intermediaries’ which mostly are banks and SACCO’s. In theory they are supposed to lend more than half a million but they don’t. I think the youth fund gets funnelled to other products of these intermediaries because they don’t mention them. You end up looking for them instead of them looking for you. Family Finance bank is the only one I’ve found that is a defined youth loan.

Related: Four other SME finance avenues suitable for ICT start-up entrepreneurs in Kenya.

12 thoughts on “Who Funds ICT Start-Up’s?

  1. Anonymous

    Nice one Banks, you can also check out Emerging Capital at Ansh Plaza near Equity Bank Kimathi Street. Though I’m not sure if they do ICT start-ups. They are good with advisory and related services.

  2. Ssembonge

    VC should be the last port of call for anyone wanting to fund a start-up. You are more likely to succeed if you use your own capital/savings. Without savings, the next best source of capital should be family and friends.

    I’ve previously written about funding a start-up and I’m now in the process of setting up a technology business. My initial business plan looks nothing like what my business is now. I’ve gone through a steep learning curve and I’m glad I’m working solo cause I have to be very flexible.

  3. MainaT

    I know somebody who might be able help.

    A lot of us fail because we think something that sounds good to us will sell. One has to think from the potential customers’ pt of view.

  4. Sijui

    Banks, if there is a will there is a way. I will second those who have mentioned personal savings and friends/family. When we started atrams.com, the business idea was not ours but a friend’s/partner……we took out a home equity loan from our house to fund his venture and became co-owners.

    Have you explored he option of pooling funds from friends’/family investments?

  5. Anonymous

    Bottom line is two things (possibly more) … there aren’t people out there interested in funding ideas – at least not in any meaningful way. So, if you’re looking for funding, you need to have something that people can touch and feel and that has results already.
    Also, that becomes the proof of your commitment to your idea. A lot of people have ideas but will give them up at the time of difficulty. So, the fact that you’ve been with a business for a period of time and sank your money, time, and effort is a good sign that you really are committed to it. Why should they commit their money when they’re unsure about your long term commitment. They need tangible evidence of your long term commitment.
    Other thing is relationship building which is what the banks really are asking for. They’re saying … let’s build a relationship and then on the basis of that we’ll lend you money. But you’re saying you don’t have the time to build the relationship and just want the money straight up. Well, it doesn’t work like that. Invest in the relationship by opening a deposit account, doing your transaction banking there, becoming familiar with them, and then you have a better chance of getting their money. Similarly, as someone has suggested, if you build good relationships with family, friends, colleagues then they’re likely to provide some startup capital to support you. If you got 10 friends and family to contribute 10K each, you’d have 100K. And if you’ve save another 100K, that shold be enough to get your business off the ground. – your business plan needs to match your budget.

  6. Mushenzi

    You can also try out business partners international in Upperhill..google out their website. My observation is that most funds will only fund viable businesses that require amounts greater than 3 or 4M

  7. Seasons & Reasons

    As someone who has been on this route twice, I say forget banks and venture capitalist( these don’t exist in Kenya anyhow)

    You will have to look for angel investors and this means networking especially in the sector you wish to enter into.
    I suggest you try the Kenya Association of Investment Clubs.If you can get your idea presented in one of their forums, you may get an investor there.

  8. bankelele

    So far the new names to check out include;
    – Emerging Capital
    – Business partners international (BPI)

    Ssembonge: savings culture is rather low here, I meet people everyday with ideas, but no funds, but looking for a bank to fund them. Sorry

    MainaT: good point, many entrepreneurs have an idea, but the market is a weak aspect of the proposal; their view is that it is so good, the market will adapt to them, not the other way round

    Sijui: savings first, banks want to see commitment. But what you did was risky – taking out a home equity loan for a business idea? And for a friend?

    Rafiki : Thanks for the tip
    Mushenzi: thanks for the tip

    Seasons: you’re the second one to suggest an investment club. But i see a reluctance on entrepreneurs to accept equity funding, they’d rather have easy (no strings attached) loans that they can pay back, without sharing the management and (eventual) profit cake

  9. Mark Grimes

    Hmmmm, seems like very early stage seed capital could be a good idea. As many know, startup money is only part of the challenge to getting a biz off the ground, up and running.

    If the entrepreneurs want money, experience, contacts, and such…I guess they’d better start opening up more to the idea of cash for equity. After all, no exit path, no liquidity event.

    Many years ago I found myself having lunch with a NW tech entrepreneur that had started up 3 very successful companies. I was supposed to be meeting his wife, but he should up because she was ill. I’d never met him before and wanted to ask him at least one great question and learn something from him.

    The question was, if you could go back to the first start up and just take one piece of knowledge with you, what would it be? He paused, then answered… He would not be as overly concerned about giving up equity in his companies. 1% of a lot is worth much more than 100% of nothing.

  10. lulugal11

    I found your post through ProBlogger’s group project and just thought I would stop by to say hello to the top 5 posters for the first day of the contest.

  11. Maishinski

    Funding is not just about money. If you are smart about it, you can start off without having to talk to moneylenders.

    Things you can do:
    1. Talk to suppliers about your plan and try get them to stock you on credit – e.g. by negotiating exclusive contracts for certain brands.

    2. Share shop space with a related but non-competing business (e.g. Cyber Cafe – if you plan to sell computer consumables & pheripherals). Negotiate on per square foot – rather than half/half. This gets you in cheaply on a prime location.

    3. Share wage bills. A receptionist can be shared between two businesses. Each business contributes half of the shared wage bill.

    4. Share copiers, phone bills, elec bills etc etc – but base it pro-rata on usage.

    If you think in above terms, your initial capital requirements reduce significantly. This provides you with a cashflow coushion for hard times – should your business experience a slow start.

    Many entrepreneurs plan for success… however very FEW plan for failure. Understandable since entrepreneurs tend to be highly optimistic people.

    Highly successful business people anticipate Failure – and protect themselves.

    Some strategies I have seen:

    1. Plan for healthy Cash flow reserves (not profits). Cash flow pays debts. Prompt payment=good relations with financiers/suppliers=healthy lines of credit.

    2. Minimize risk. Get partners / shareholders instead of loans. Ensure all potential personal liability is shared by everyone on board.

    3. Have a buy-out clause with your partners giving you the option – but not obligation to buy them out for a specific amount (e.g. shares + 30%) after 5 years.

    4. Protect your intellectual property. Have NDA clauses in your business plans. Make your partners sign it. retain intellectual property rights to your idea/brand/product/invention/enhancement – and rent it to your company for royalties.

    5. Start as big as you can. Statistically, most failures are small startups (they choke on cash flow, fail to pay creditors, then wind up when creditors pani – despite healthy receivables).

    6. Protect your personal assets. Do this even before you start the business. Creditors are reluctant to move-in on paupers. They would rather lend them some more to save their businesses. If you look rich, chances are that someone will try go after your personal assets should your business fail… and all your hard earned personal wealth will go to LAWYERS (at the very least).

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