Why Kenyan Startups Are Failing- Leonard Mudachi

[@KenyanInnovator]

This conversation covered adequacy and cost of capital as a major component of the failures. While very important, it is not by any means the sole reason, there are several others. Some of these include: 1) Financial literacy 2) Business environment ie taxes, costs such as licensing, power, corruption, unethical practices, favouritism 3) Dversion of resources (e.g Kosewe) 4) Poor/inappropriate human capital (particularly in family businesses ) 5) Lack of staying power when the going gets tough ( grit & tenacity) All the above are worthy topics on their own. Let's keep having the conversation...it is only in doing so that the solutions will manifest.

[@mimi21746]

Reasons(I am a Kenyan Startup Founder): 1. Most Kenyan startups aren't building for global audiences. Investors support startups, from anywhere in the world, that can attack global markets, Kenyan startups think too small. 2. Density of investors for startups in Africa. Honestly, you can't compare investors in Tech Hubs like San Francisco & New York vs Nairobi 3. African capital markets are too shallow, and investors find it hard to exit out of African startups incorporated in African countries, so they don't invest. 4. Kenyan founders should work with investors locally, those in the West and those in the East as well. Those in the East easily invest in African startups vs those in the West. 5. The USD rate hikes mean capital is expensive, so startups need to have revenues as early as pre-seed or seed rounds. Just build real businesses, and avoid copying US startups as they may have deeper pockets than you. 6. Kenyan financial institutions are hesitant on building financial infrastructure for startups and small businesses, they just do insider lending.

[@4znbn897]

now this is the real issue at hand , well put summary of what needs to be done on the ground , we are as able like any other enterprises to seek funding but have to master the business ideology

[@mimi21746]

True, Kenyans are smart, ni kuchangamka to and then sharing that knowledge, information and support as a community, and we can even rival the foreigners with the right mentality. Startups are a team sport@@4znbn897

[@gamersnevercryever]

Yes i live in Europe and theres a certain entrepreneur i wont mention his name i was explaining to that he should begin focusing on the global market - his products he is selling for like 4000/- to around 30,000/- and im explaining to him he could sell for minimum 50,000/- abroad and he was telling me how oh kenya has market 😂😂😂😂 i was just looking at his small mind and laughing inwardly

[@westmax8491]

One major problem you failed to mention is the low disposable income across africa.

[@mimi21746]

@@westmax8491 yeah, even that one is a great point. Africans only buy necessities like food, shelter, clothing. I think if you create a startup around those it can succeed in Africa.

[@John_K2]

Leonard you are so well aligned with the DNA structure of how businesses in Kenya are funded and operated. It would give me pleasure to have a session with you on gaining insight and knowledge on foreseeing and avoiding many contingencies that hits business so hard.

[@georgekariuki8614]

The funding is there and I have been able to raise funds internationally as a Kenyan startup. My belief is the world doesn't need another new founder,let alone one who is doing a basic /undifferentiated business. Our market has too much entrepreneurial activity yet we produce goods/services that can't scale outside our borders. If you want to play in this game,you have to think of yourself as an Olympian playing on the global stage. Think very hard and bring disruptive innovation to market,it is the only way to survive in this space!

[@4znbn897]

well stated

[@mimi21746]

Very true. Couldn't agree more.

[@fredrick-gz6fr]

Please Sir connect me to a funder.I have an idea.Thsnks

[@lugaritzbrown2250]

Hi,could I have your email

[@TheTeddykimani]

I am a homegrown entrepreneur , I have a tech startup started halted starting again.... listen to Mudachi that man understands homegrown startups well. Foreign Venture capital fund foreigners with startups in kenya even with dumb ideas ... Kenyan homegrown startups are yet to access venture capital or local funding and as Mudachi reiterates, the requirements to access such venture capital disorganizes the dream the vision and the model of homegrown founders yet kenya and africa is very peculiar or distinct thats why these foreign funded businesses never make profit not just in kenya but in africa because profitability is determined and planned for in the design stage of a startups business model. So most like I have decided to fund our babies ourselves taking longer but happening as planned and avoiding the false hopes of funders

[@emilymn4468]

Thanks Teddy for sharing your experience. What’s the name of your startup?

[@TheTeddykimani]

@@emilymn4468Vukaplus

[@drmunya]

Talking from experience, most Kenyan start-ups are simply scams in the making. They raise capital, pay their staff peanuts, then the founders somehow manage to channel the capital into real estate somewhere in Syokimau, Ruai, kajiado etc. Before you know it, the startup has folded and the founders are landlords of some apartment blocks somewhere or now sell plots in kajiado! Honesty and trust are key to attracting real and sustainable funding and most Kenyan startups are yet to learn this simple lesson.

[@RichardKusiima]

The day we show up in Kenya, I am sure folks will appreciate that you can actually start, succeed and prosper in your business a d startup even under the hardest storms. Kenya, We are coming!

[@yebo-gogo]

African experts haha! That teared me up - but it's true!!

[@robertkabiru1792]

This is an amazing conversation. Some of us have struggled with starting up due to the risk averse nature of the kenyan Investor. Even with icredibly great ideas.

[@ikengitau]

There is a difference between risk and uncertainty. Investment is in the realm of uncertainty. Insurance is in the realm of risk. Investment no one guarantees you a return and if they do they are lying to you. But if a fire insurance company tells you in this area (a grassland, assuming) the probability of your house burning is 0.65--out of 10 houses 6.5 will burn in case of fire) that is risk. Read Frank Knight and Ludwig von Mises on case and class probability. Also read Huerta de Soto Money, Bank Credit and Economic Cycles ( long book, but read seven last chapters). I have 7 more if you'd wish to read to read them.

[@stove7197]

The socio-political environment in Kenya is simply not very conducive to potential local capital investment; it is too intertwined with the financial markets sector or otherwise any entrepreneurial opportunities of any attractive repute/potential. The same knowledge of the local environment that would better inform "demands" on fundees is the same double-edged sword that informs the risk aversion of would-be local funders who are in the know of so-called "things kwa ground." It's all about where you're from, who you know and/or how much you can bribe even in obtaining simple business licenses etc. This leaves only "ignorant" foreign capital and its "foreign" demands as the major funders, and with it the risk of capital flight when foreign priorities change. I mean take Mumias Sugar for example, the locals are still under the illusion that chasing off one heavily monied and connected investor somehow results in the vacuum being filled by local money that is not similarly well connected politically. Even if a genuine local investor were capable and interested, they'd never make the cut without getting in bed with corrupt government officials, no different than the last investor(s) before them. Nothing changes...rinse and repeat.

[@4znbn897]

out financial market is too iliquid with majority of participants foreign investors.

[@stove7197]

@@4znbn897 true dat

[@raymondmuli9067]

Very well versed. Thanks

[@jom2609]

I think we need more Local VC too. VC who raised fund from local investors who undetand the hitory. When you have international investors, many have higher expectations.

[@charlesnyagah7423]

Our local large funds aren't sophisticated in capital markets. Commercial property in Upper Hill isn't exactly fintech.

[@Maganjo1]

This is also very intentional

[@manenogaius]

This guy is quite sharp and know's his stuff

[@noelwafula7000]

Very insightful.

[@lwmburu5]

Amazingly lucid !

[@nkimandi]

great to see Leonard after quite while..great convo it has been..one wonders is it that would-be local VCs,angel investors are risk averse or are not sufficiently knowledgeable and still wrapped in silo type thinking

[@raymondmuli9067]

Well done Mudachi.

[@KingfinAfrica]

A wonderful conversation Leonard Mudachi is razor sharp!!

[@biltriq2332]

25:40

[@alfredotieno7253]

Is it prudent for a pension fund with a greater inclination to protect funds to invest in startups which lean towards a higher risk profile?

[@ACKTAPUSS]

Great insights the man knows his stuff 🤞🏾👌🏾

[@omwami360]

Very informative

[@geniusdynamics]

most people in kenya only want to invest in real estate

[@thecafcl8409]

1.The very idea of a startup is predicated on cheap American money. It's not viable to scale and be profitable locally and reliant on local funds 2. The media needs to have spotlight on the success stories to inspire others 3. Government can direct capital to the desired sectors but it has not demonstrated will or skill to pull it off. To build our financial market

[@4znbn897]

3rd point is well stated.

[@bristownagila3137]

Pangani has stalled for a while now, no activity there. Can the CS explain

[@KEEM_DANSITA]

Kenyan Jon Jones

[@samchegz9492]

two words, data mining!!!

[@westmax8491]

The elephant in the room is low disposable income.

[@iamsyourdadi]

We keep ignoring this to our peril

[@charlesnyagah7423]

Twiga Foods

[@4znbn897]

i believe that is a conduit to fraudulent activities ,

[@mlw237]

"...who gave you money....??" 😈

[@4znbn897]

correct your guest, uber reported profits this financial year

[@zuhebmukhtar7357]

Compared to how long they've been operating, I believe his point stands if this is the first year they've reported profits.

[@one2moja1]

OC Mudachi you are very articulate with your points. Kudos.

[@stove7197]

He specifically qualified that he was not up to speed with this year's Uber profitability.

[@4znbn897]

@@stove7197 while listening the guest affirms that the company has not been profitable. going foward he only needs to reference point with clarity to make the conversation logical

[@stove7197]

@@4znbn897 sure, but msikize pale minute 9:30…”I’m not up to date for this year..” so he qualifies his assertion by discounting his accuracy as regards the current situation. I don’t know what the debate is about his statement but he’s very logical by doing that.

[@georgeodhiambo3306]

Shida ni IMF