Leveraging Homegrown Angel Investors to Spur Growth of Innovations

Villgro Kenya aims to impact not only innovative health start-ups but also grow the ecosystem in terms of growth in investments. In the second part of an interview with Paul Belknap, we gain insights on the need for more homegrown angel investments to catapult innovations within the ecosystem.

90% of capital injected into startups in East Africa comes from the West. While we have successful entrepreneurs within our borders they are wary to invest in start-ups and instead choose to invest in other sectors like real estate. This is majorly due to the lack of strong regulatory measures, unpredictable timelines and their traditional understanding of investment which makes investing in the innovations seem like throwing money into a hole.

Undoubtedly Kenya has been named as a frontier for innovations in Africa however, we still need to do more to show homegrown investors the value the world sees in innovation and convince them to put more money in the ecosystem to move the innovations to the next stage.

Q: Villgro Kenya has contributed to the health innovation ecosystem largely through its investments into early-stage companies and incubation programs. However, there is a gap in funding startups to scale, what can be done to mitigate this?

P: We can’t solve this problem by ourselves but one of the things that we saw in India was that there were so many more complementary sources of funding available for early-stage entrepreneurs. Government grants, angel investors and other grant funding/more investors with an early stage appetite, we need more of that.

One of the things Villgro Kenya has identified that we need to be able to fund startups to a greater extent in their journey than we needed to in India because there is a lack of complementary funding. On the order of $150k would help those companies move to the plate where they would start to match up with some of the investors that are more active in the ecosystem, some would come in the form of co-investment with early-stage investors as well.

Increasing our ability to fund companies and invest in companies is important but we can’t do it all by ourselves. If you look at things that Kenya & Uganda needs to work on, the government can play a role in terms of doing investments/grants into early-stage companies.

I don’t know that any government is great at investing in early-stage companies. The more successful ones have done a funds approach where they are allocated a set of resources and they pick management to do those investments for them.

There is a real need for more angel investment into startups in the ecosystem. Angel investment or the same individuals can consider investing in funds interested in tackling the pre-seed stage of funding under $150k- 500k.

I've talked to a few people who are frustrated with investors seeing real estate as the safe bet. Getting people excited into investing in entrepreneurship particularly the health sector seems to be lagging which is contributed by the fact that there have been very few successes in the health sector making people more cautious in investing into it.