Faced with a small VC scene, Ugandan founders dig deep to bootstrap startups

For Ugandan entrepreneur Brian Matsiko, raising funding for his fresh food delivery platform has been far from easy. It’s taken him six years to raise the capital to start the business.

“Sometimes, I had to walk long distance every morning and evening to save on transport and save money for the idea I believed in,” says Matsiko (pictured above, far left) who leaned on friends and relatives to tap the funding he needed to get his business going.

He started saving money for his startup Bringo Fresh, while still at university, putting away about 50 000 Ugandan Shillings ($13) a month. Then in 2014 when he got a stable job he began saving around 200 000 Ugandan Shillings a month ($13) to fund his startup.

‘The venture capital scene in Uganda is quite small’– Digital Health Access CEO Hilda Asiimwe

Matsiko’s business — which he finally launched in May — sources fresh organic produce from smallholder farmers and delivers it direct to its clients’ doorstep. He plans to start exports to the DRC, Egypt and Norway next year.

“I am still paying them back, hopefully by end of 2019, I will have no debt and Bringo Fresh will be cash positive,” says Matsiko who was placed third at this year’s edition of the Seedstars Kampala pitch event.

His story is not unique, very few Ugandan startups have managed to raise venture capital to fund their startups.

A Partech Ventures’ funding report released earlier this year found that Ugandan startups had raised $16-million off five deals in 2017, a significant increase from the $270 000 raised in 2016.

In contrast, over the same period, Kenyan and Rwandan startups raised $147-million and $36.7-million, respectively. In 2016, Partech said Kenyan startups had raised $92.7-million while their Rwandan counterparts had raised $16-million.

Graph depicting total funding raised per country in 2017 based on analysis by Partech Ventures (Cyril Collon via Medium)

Another report published by Kampala-based management and financial advisory firm Asigma Capital last year in April revealed that venture capital only accounted for two percent of committed capital in Uganda in 2016 (see chart below).

Matsiko says most Ugandan tech entrepreneurs have to either tap into their own personal savings or seek funding from their families, friends and relatives. Others, he points out, are turning to competitions and projects.

‘Came up with $25 000 from our savings as co-founders’

Hilda Asiimwe — who runs Digital Health Access a platform that connects potential patients with health professionals — says one of the main challenges facing Ugandan tech entrepreneurs is lack of access to funding, she says the country has “few” investment firms.

“The venture capital scene in Uganda is quite small,” she says. Those that are able to land investments, secure on average only between $5000 and $100 000. “Most are into social impact businesses or into sectors that are high growth,” says Asiimwe

She believes there’s lack of support for local startups, especially from government agencies and organisations who she says could also benefit from the services these businesses could provide.

The startup — which Asiimwe co-founded with senior systems developer Richmond Ampabeng Bediako — launched operations in Uganda and Ghana in May. “We came up with $25 000 from our savings as co-founders, though we are currently fundraising $500,000 to scale,” she added.

‘Not yet investor ready’

She confirms that most Ugandan tech entrepreneurs are bootstrapping and like Matsiko believes part of the problem could be that they are not yet “investor ready”.

“Most still are bootstrapping as they are not investor ready. Few, however, have raised money from angel investors and also done some few rounds of investment though they are still very early in the investment cycle,” she explains.

Asiimwe says although international investors have started paying attention to Uganda’s tech startup scene, startups are not solving problems “big enough” for investors to invest in. She believes Ugandan startups also lack diverse teams and offerings.

“Also, investors who have been in Uganda have come to discover that Ugandan startups are not very competitive, say like the case in Rwanda and Kenya which have had very much attention from investors due to their markets (which) are very competitive,” she adds.

‘Lack of finances hinder us’

Ogwal Joseph, CEO and founder of Ugandan mobile micro savings platform Agro Supply — the winner of this year’s Seedstars Kampala event — initially funded the startup using his own savings too when he founded it in 2016.

“Brandon Chase who is now my co-founder joined me and he also invested some money which helped us a lot and luckily we also got some seed capital from Tony Elumelu Foundation is help us in expansion and ever since then we have been funding ourselves by reinvesting our revenues,” he explains.

Despite having 5000 smallholder farmers on his platform who generate a monthly revenue of about $6600, Joseph has not managed to raise any funding from external investors other than the $5000 he received from the Tony Elumelu Foundation last year.

“We have big plans but lack of finances hinder us from doing more that is why we are looking at raising $250 000 to help bring our vision to life and also help us reach out to so many smallholder farmers across Africa,” says Joseph.

VC scene growing

Although Uganda’s local venture capital scene is — like Asiimwe put it — small, recent developments suggest it is growing. In March, tech site Disrupt Africa reported that the Kampala Angel Investment Network (KAIN) had launched in Uganda. The new organisation aims to connect innovators, entrepreneurs and angels.

Startup and angel investor platform Angel List has six investors listed as residing in Uganda, with over 1000 said to be interested in investing in Ugandan enterprises.

The Ugandan government has also shown some commitment to helping fund local startups.

In April, the Ugandan government, through its Ministry of ICT and National Guidance, awarded 2.5-billion Ugandan Shillings ($664 125) to 12 startups under its National ICT Initiatives Support Programme (NIISP).

Featured image Bringo Fresh CEO and founder Brian Matsiko (Supplied)