In early 2022 I had this idea…

The capital markets in Kenya are not easily accessible to many startups and micro, small and medium-sized enterprises (MSMEs).

In Kenya, the angel, seed and venture capital (VC) funding ecosystem prioritises tech-led companies that are built in the ‘Silicon Valley’ style, ideally with a proprietary technology stack, and with a growth story that talks of rapidly acquiring share of a huge market, and that requires hundreds of thousands of dollars to do it. There is some sense to this.

• Technology can enable you to scale rapidly in ways that traditional operating models may not e.g., building/acquiring hundreds of thousands of hotel rooms may cost you trillions of dollars and a couple hundred years; but a technology platform enabled AirBnB to do it in less than 10 years.
• Proprietary technology is a barrier to entry and limits the competition that you would attract if you become successful.
• Rapid growth in market makes the company more valuable and creates return for the investor.
• Since you intend to grow big rapidly, you require to raise lots of money to fuel your fire.

This the “VC” logic and it makes sense.

However…

• What if your startup or company is not necessarily tech-led or running proprietary tech?
• What if your current operating model is profitable and all you require to do is grow it faster (that is, scale up)?
• What if you are operating in a large market, you have a validated product (that is, you have product-market fit, which is proven by having paying customers) and all you require is a marketing budget and some good hires to really fire up the company and grow faster?

The current VC funding ecosystem probably does not consider your company a good fit. If you move higher up the chain to private equity (PE), your company is most likely going to be too small by revenue, assets and valuation to interest them.

So you probably visit your bank and try to raise your growth capital in that way. You will try to raise the money on your company’s books but the collateral and cashflow requirements will probably nudge you towards raising the money on your own account via a personal loan which you will secure on the basis of your car and other personal assets.

So it goes that many companies with growth potential do not have access to the capital that they need to scale up. What to do?

1. Option 1: Re-engineer your company to become tech-led and try to raise money in the mould of the current Kenyan angel, seed and VC funding ecosystem.
2. Option 2: Raise commercial bank money on the company’s balance sheet and cash flows if it qualifies.
3. Option 3: Raise commercial bank money on your personal assets if you have enough.
4. Option 4: Trudge along and hope that next week/month/year will somehow be better.

My stubborn idea