Here is why Zimbabwean startups struggle to raise capital from international investors

Leonard Sengere Avatar

Serious question here – how come Zimbabwean startups do not pull in as much funding as their African counterparts? Is that even a fair question to ask? Let’s talk about it.

There are various reasons why Zimbabwean startups struggle to raise funding from international investors.

It may sound crazy to say that when just a week ago we were talking about Jamboo raising over $1m in just over a month. By the end, we will all understand why Jamboo stands out and why on the African continent, million dollar deals are more commonplace.

Small market

There is no getting around it, Zimbabwe is a small market. There are about 15 million of us in this teapot and that sounds like a lot until you realise that Cell C, the fourth largest mobile network operator in South Africa reports having more than 16 million subscribers.

So, the big gun in this country, Econet, has way less subscribers than the fourth largest in South Africa.

Consider that most business ideas will have addressable markets much less than 15 million. We have talked a lot about Starlink but if we’re being honest, with kits costing above $600 and subscriptions close to $40, there’s probably less than 50,000 people that can afford that.

Those are not do-whatever-it-takes-to-get-in kind of numbers. Whatever crazy gatekeeping may be going on, I would bet if we had a market the size of Nigeria’s, Starlink would have found a way by now.

So, when someone starts a ride-hailing business in Bulawayo for example, we’re talking really small numbers.

Bulawayo province has 666,000 people and if we’re generous and say 10% of the population would use the ride-hailing service, that’s 66,000 people. That’s not making a venture capitalist in Silicon Valley salivate.

Poor population

See, those of us fortunate to be reading this sometimes find it hard to believe the level of poverty in this country.

We think we’re struggling but when Zimstat, the government agency, says 61% of Zimbabweans make less than Z$100,000 a month (US$13 at the time), we scream, “That’s not possible, it can’t be that bad, can it?”

Oh yes, it is that bad. So sometimes when a startup finds a problem worth solving, the business model falls apart when they realise although the people need a solution, they can’t pay what’s needed to warrant the business.

Investors are aware of this. In our talks with startups, we hear of how how some investors pulled out after googling Zimbabwe and realising we have a small poor market. All this after being excited by the projections pitched to them.

Currency stuff

Our national currency is a disgrace. You know they say inflation is akin to taxation because it has the exact same effect – it reduces the spending power of the population.

The loss in value of the Zimbabwe dollar is a deterrent for would-be investors. Aren’t we a dual/multicurrency economy though?

Yes, but in practice, as our mobile network operators will tell you, you will still find yourself saddled with Z$ and wishing on the government to allow you to convert it to the USD.

Country profile

We have a reputation as a tough economy to operate in – high inflation, iffy political situation, high taxes etc.

We have a government that believes in Nicodemously legislating through Statutory Instruments so as to ensure the public has no chance to think of loopholes beforehand.

That makes it hard to plan and we have seen some businesses fold following some of those overnight statutory instruments.

Then there is the whole sanctions issue. As much as they are targeted, the country has still lost out on potential investment as investors fear accidentally working with companies that may have a sanctioned individual as a shadow director.

Not a death sentence

The above does not mean no startup can get funding in Zimbabwe. It just means it is much harder and a Zimbabwean startup needs to pitch like their lives depended on it.

They have bias to work against and they have to demonstrate that despite the above, their business model is solid. So, it has to be more solid than some of their African counterparts’.

We have seen the likes of Entry raise tens of thousands from international investors and so it can happen. Again, not significant amounts compared to other African countries but huge in Zimbabwe.

Then comes Jamboo which raised over a million in a month’s time. Well, they may be Zimbabwean in that the founders are Zimbabwean and that the app will serve Zimbabwe, but Jamboo is actually a UK company. That helps.

Also, we find that both investors who pumped in the mil are Zimbabweans. So, not really international investors. However, one might argue that’s even more impressive than getting international investors because Zimbabweans do not have a culture of investing in startups.

With this said, let us talk about…

Africa Tech Summit Nairobi 2024

Africa Tech Summit Nairobi has announced ten African tech ventures that will showcase their solutions to a diverse audience of industry experts, investors and fellow innovators on February 14th and 15th.

While African startup funding declined in 2023, the investment showcase continues to foster collaborations and stimulate investment opportunities to bridge the funding gap in the ecosystem. According to data from Africa: The Big Deal, African startup funding experienced a 39 per cent decline, falling to $2.9bn in 2023 from $4.6bn recorded in the previous year.

The 250+ entries received from various countries across Africa, including Kenya, Egypt, Tanzania, Nigeria, Ghana, South Sudan, Malawi, Angola, Morocco, Botswana, Benin, Congo, Uganda, South Africa, Sierra Leone and more, highlight the immense potential for innovation and partnerships in the continent. The ten selected ventures, spanning fintech, agritech, e-commerce, Web3, and climate-tech sectors, are looking to raise funding ranging from $500,000 to $15mn. They include:

Node Bio (Kenya) is utilizing cutting-edge plant science to develop crop treatment that effectively combat the adverse effects of climate change. Their innovative solution, Farmchef, enables plants to withstand drought, extreme heat, and other water-related stressors.

Valu (Egypt) is MENA’ s leading Buy Now Pay Later (BNPL) lifestyle-enabling fintech platform, offering customers and businesses convenient and comprehensive financial solutions.

Bingtellar (Nigeria) is building payment infrastructure for global citizens including freelancers, remote workers, contractors, businesses. Their ramp product simplifies the process of buying and selling crypto and facilitates swift money transfer across Africa.

Dukka (Nigeria) is digitizing payments and bookkeeping solutions to assist small businesses across Africa to accept all digital payment methods.

FutureLink Technologies (Uganda) is a digital marketplace that is simplifying financial access for individuals and facilitating payments for financial cooperatives. FutureLink Technologies is the first African company to win the Global SME Finance Platinum Award for Product Innovation of the year 2022.

Tausi App (Kenya) is a beauty tech company that is leveraging technology to link beauticians to potential customers. Tausi has registered over 6000 beauticians so far.

Feegor (Nigeria) is a B2B e-commerce company that is connecting Small and Medium Enterprises (SMEs) to manufacturers and major wholesalers.

Peercarbon (Kenya) is a climate fintech startup leveraging granular emissions data and cutting-edge sustainable finance technology to empower African SMEs. Peercarbon’s Software as a Service (SaaS) platform provides real-time insights, making it easy for businesses to track their carbon footprint.

Regxta (Nigeria) is making financial services accessible to underserved communities and micro-businesses in rural and peri-urban areas across Africa, including internally displaced persons and refugees.

URBANET (Kenya) promotes international dialogue on development activities worldwide, providing insights on municipal and local governance, sustainable urban development, and decentralization.

Henry Umunnakwe, Ecosystems & Sales Manager of Africa Tech Summit shared: “Amidst the challenging backdrop of decreased funding for African startups in 2023, the resilient spirit of entrepreneurship continues to thrive across the continent, and we are delighted to introduce these 10 pioneering ventures for this edition of the Investment Showcase. Our main objective of the Showcase is to spotlight and foster connections for these ventures with both local and global investors. We look forward to welcoming over 1000 delegates to the summit to catalyse collaborative efforts and propel investments to further fuel innovation and growth throughout the continent.”

Register for passes to Africa Tech Summit Nairobi, Feb 14th & 15th here.

We will keep looking at some of these events to get a better idea of which business solutions are funded. We want to see Zimbabwean startups on these lists and we can all share what they need to do to make that happen.

So, if you a startup founder, pay attention to the chosen few, analyse their models, websites, pitching techniques and the like.

Also read:

20 comments

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  1. Reader 123

    Interesting from the list of startups given that most of them are Africa-focused as opposed to just focusing on their country of origin, unless the point of the market is that you need a good home base to start from. Thats just on the market size on the other comments I think I am in agreement—most tech solutions just won’t scale because of those solutions with a Zim market base.

    Something that would scale is something that goes to the basics and addresses the needs of the grassroots, which would be hard at times to make since the ones in the grassroots are not the ones getting the opportunity to make the innovations.

    I also wanted to suggest grant funding, but the lack of accountability in those areas is also concerning. If we are to do a survey of Zim companies that have gotten grants, you may find that they disappear within a year or two of receiving funds, which could mean:
    1. innovation couldnt scale and they lost money
    2. owners found a better use of the money

    Has Techzim ever done such a survey since over the years you have broken the story on most of the startups that have gotten funding.

    1. Alderman Mashora

      Tuckshoplus is an android app for retailers in Zim (especially sole traders). It helps them manage every aspect of their store e.g inventory, customer relationships, Point of Sale etc. The App is completely offline. Here’s a channel link if anyone is interested in the Beta version coming 25 January 2024:

      https://whatsapp.com/channel/0029VaEfMOF7IUYNeiZ0Tw2l

      In my community, retailers are always complaining kuti maBusiness avo haakuri. I looked at the issue and saw kuti it’s probably improper record keeping, I’m trying to solve this.

  2. fadzie

    jsjshsjhes

    1. Are you seeing this?

      I wholeheartedly agree! Very insightful.

  3. Dr Knight

    Another issue is the lack of an exit. Most VC’s expect to get their returns via the private company going public. Well idk about you but Africa and Zimbabwe especially doesn’t have a vibrant Stock Exchange and we haven’t had a founder led new company on either of the exchanges in a while, ZSE and VFSE. You give a startup money and there is no concrete route to getting returns.

    1. Ashley

      It’s just politics.Everything else will correct itself.
      All business models which are difficult to control from a political standpoint will not be allowed to flourish.They learnt the hard way from comrade strive masiwa in telecoms. So they are happy to let you succeed so long as your business is tied to resources which have an easy paper swap recourse upon non compliance.
      So digital,or service driven enterprise will go nowhere . The selectocratic strategy driven ruler will not allow it.

      1. Are you seeing this?

        Other countries are embracing digital to the point of looking the other way to let online scammers build actual offices in broad daylight! Imagine if gov actually enabled the growth of the online service/gig sectors to where Zim could challenge for position amongst the top outsourcing destinations in the world!

  4. diaspora

    you forgot about Zimbabwe and Africa in general is very corrupt.most zimbos themselves wouldn’t invest here here or SA. take simple diaspora. transaction whereby I send money to build a house. half of them don’t exist

  5. Murambwi

    Interesting story on start up funding in Africa. I have a few issues, l’m interested in submitting for discussion:
    1. For the Zimbabwean case in particular, is there a viable way to proliferate smart phones especially to rural Zimbabwe were 68% of the people live and lower the cost of data?
    2. Given Zimbabwe as a small market, is a regional approach to scaling (SADC), feasible and more viable?
    3. Given our currency issues, for digital enterprise in particular, isn’t registering in a nearby country and using digital money exchanges are viable means to circumventing local currency issues while operating in Zimbabwe?
    4. Is it possible for techzim.com to publish on regional laws on investment and operating start up, how entrepreneurs could navigate the obstacles from a regional perspective? After all @ least for digital, the tyranny of geography shouldn’t be an obstacle to innovation

    1. Are you seeing this?

      1. Starlink! It’s almost a meme in the TZ comment sections but seriously, Starlink. In the short term, centrally placed units to distribute signal, maybe a mesh network to spread it further. Long term, netone signing up for Starlink’s Direct To Cell service. As a parastatal, they can finesse the charges.
      2. I think so, but I guess some concepts will be harder to scale regionally than others.
      3. Again, I think so. No point in swimming upstream when jumping into a river flowing your way is possible.
      4. That would be nice. I think there was an ‘Ease of Doing Digital Business’ ranking at one time. If it still exists, TZ could build off of that

      1. Anonymous

        Thanks for the reply, l’m interested in creating an ongoing open dialogue on issues concerning start ups on this comment section, l hope you’re interested.
        1. Solving the cost of data transfers ($/Mb) to make it an affordable convenience especially in rural Zimbabwe will help conquer the information asymmetry barrier to the development of a viable market economy (price determination). In my view, solving it, is a critical national challenge to economic development.
        2. Yes, some concepts will be harder to scale on a regional basis than others, the advantage would be @ least a viable scale for those that do.
        3. Its obvious with the political status quo, inflation is a perpetual crisis but given digital tools, it should hinder the viability of digital start ups in the Zimbabwean market
        4. “An Ease of doing Business” ranking list is nice but want is of greater interest is an expose of the bolts and nuts of the different legal regimes in the region and how to navigate them

  6. 😎

    Besides funding
    we dont have zesa to start with
    and internt too expensive
    lets solve these basics before we go
    looking for funding
    Here

    1. Are you seeing this?

      It’s a cold but necessary splash of reality. We still need dreamers and innovators to challenge that status quo

  7. Nitpik

    The market issue is not a small one. VCs want 10x on investments. Apa buying power is non-existent. I will argue that in terms of fintech and digital commerce there is a lot of potential. Logistics and last mile delivery solutions. The issue is its a nightmare to scale. Any business outside Harare is not serious enough to talk about. The common market thing is wishful thinking. Neocolonialist orgs and Sadc aren’t serious about regional integration. Still too messy. We are only going to get funding from ourselves. Eating what we kill. Aluta continua

    1. Anonymous

      Then we need to change the perspective, we approach that problem from. Generally, we Africans think legal space is granted to us, top down, from the state. Yet in English common law, economic agents thru private lawyers legislate from a contract or the court since it is they who advance society. In short, digital start ups can harness the physical infrastructure and legal loopholes in the region, to foster market integration in spite of national reticence on the issue. Already, some cross border logistics apps already exist. Can’t that space be grown?

    2. Anonymous

      Also, the key investment target for Africans should be remittances. Instead of them, being earmarked for consumption, the start up space can tap the for capital mobilisation. Unless we find creative and viable ways to convince those from here who are abroad to invest, we’re never likely to become a viable destination for foreign investors who actually invest on the African street not those who invest in the extractive sector or export oriented industries.

  8. Are you seeing this?

    Very off topic, but OMG!!! Unlocked Samsung S24 256GB is going for $250 right now for a limited time direct from their store! That’s before trade in!!! Children of God, I just wanted to share that piece of joy/suffering! If you have Diaspora willing and able, make a plan. If your wallet is strong, I guess you can ship it.

    1. Are you seeing this?

      S24+ 512GB $450, S24Ultra 512GB $550! Father God, keep my heart from cursing the fortunate😂

  9. Ted Farai Mandoreba

    I agree with you all of you guys here in the comments section and the whole article itself…. The bigger the population the healthier and more promising the venture…. So if these VCs put money according to population the startup seeks to serve… Then the lesson one of my mentors taught me about ” Your product and it’s potential customers “… .makes a bit sense in this situation (numbers / population).. he said if you want to reach hundreds of dollars then sell in your neighborhood…… If you want thousands, then sell in your community if you want millions then sell in your country….. IF YOU WANT TO REACH BILLIONS HAVE A PRODUCT THAT YOU CAN SELL BEYOND YOUR RACE……so in my opinion I think if these VCs look for the potential of the startup penetrating beyond the targeted market….so I think as much as these startups are innovative….they must try as much as possible to do business beyond Africa and include all races

    1. Murambwi

      All entrepreneurs start with a limited scope, it what makes their idea feasible. An idea is eventually scaled as its footprint enlarges. Africa is already an underserved market, there are a lot of market segments that are wholly ignored but canbe mainstreamed which are growing. That’s was what Econet and Ecocash did after 2008. Even companies like Proton have managed to created a manufacturing & logistics business model that allows bread to trickle to the rural periphery without a major mark up on its retail price yet retain profitability. African entrepreneurship should be driven torwards unlocking economic opportunities for our underserved market as it is us who understand our lived reality. We can’t wait for the Chinese to unlock potential for us like they did in our small scale mining sector with the cheap diesel engine powered equipment (compressors, hammermills, generators), which could have been something we could have done for ourselves as Africans. We have to also observe that, the Chinese e-commerce space was driven by local entrepreneurs trying to change the lived reality of their fellow countrymen. Even Israel with the small population it has, is a technology hub for innovation. We may have obstructionist politics but the digital space married to creativity might just allows us to transcend the obstacles

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