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Raising Capital For Your Startup in Kenya: All you Need to Know
Raising Capital For Your Startup in Kenya: All you Need to Know
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Raising Capital For Your Startup in Kenya: All you Need to Know

Doris Kendi
October 20, 2021

Let be honest; we have all had an epiphany moment where we get a great business idea that will generate millions overnight. It’s like a bulb that lights up in our brain when you are in the shower or in the middle of the night when you have made friends with insomnia. 

It gets you excited, and you immediately start thinking of how you will be the new ‘mkubwa’ in your village. 

But most times, you are rudely woken up from this dream by reality. Your business idea never lives to see the light of day. Why? Money! Or rather, lack of it. 

Money is what makes a business idea feasible. Otherwise, this idea, just like Antoine de Saint said, only remains a wish. 

It's no secret that most businesses struggle with financial difficulties. Heck, even people without businesses struggle financially. It's a universal problem. 

For startups, in many cases money is usually the number one factor determining whether you will have a successful start. Having a great business idea is good but having the finances to turn the dreams into reality is even better. 

So how do you raise capital for your startup? Very few people know how to maneuver through entrepreneurship unscathed. If you are planning to raise capital for your startup, this article is a great start to help you avoid the common pitfalls most entrepreneurs face. 

Where to Get the Capital to Start Your Business

You may be wondering where you will get capital. There are various avenues to explore that will help you kickstart your entrepreneurship journey. 

Personal Savings

Well, ideally, you are supposed to be the primary financier for your startup. But you wouldn’t be reading this article if you already had enough money in your savings to start your business, right?

Still, this article wouldn’t be complete without mentioning personal savings as a viable source of business capital. So, the first thing you do as an aspiring business owner is to check what you have at hand. 

Do you have savings? Or an asset that you can convert into cash to help you start the journey? Are you able to set aside a certain amount from your monthly income from now so that in a year or so, you have enough capital for the business? 

This is by far the best option when starting a business for many reasons:

  • You have better control of your business
  • There are no extra costs, e.g., interest rates
  • You have full ownership of your business, etc.

Personal contacts

Growing up, I remember my family and neighbors in the village holding these huge fundraisers they called ‘Harambee.’ It was like a giant ‘merry-go-round’ but for the whole village. These gatherings raised money for the sick, members with children going for higher education, and sometimes they would raise money to help members start a business. 

I remember as a little child getting really impressed by these gatherings. But they aren’t popular anymore. At least not in my village. 

However, this goes to show raising business capital through family and friends is a great option. People close to you are people who are likely to trust you and buy into your dreams. When you are looking for capital, you will have conversations with your close friends and family about your ideas. Some will be willing to chip in and contribute towards your capital. So, take the chance. 

However, if you choose to raise capital from friends and family, you need to be very careful. Make it clear about the terms and conditions. Does the money come as a gift? Will you be expected to pay back? When? Will it be in installments, or will it be in exchange for shares in your business? This will help you plan how much money you will be willing to accept from your personal contacts. 

Business loan 

If the first two options are not viable, the next most reliable and cost-effective way is to apply for a business loan. 

If approved, a bank or finance institution gives you the capital and offers you flexible loan payment options, making the loan repayment journey easier, especially for young entrepreneurs.

In fact, most financial institutions lately have tailor-made options specifically for small businesses. With a well-developed business plan, you are sure to get approved for a business loan from one of the local banks — but ensure that your business can generate enough revenue to finance the loan. 

Angel investment

Just like its name, this is the type of investment that can save your business idea. If you lack enough funds for your startup, an angel investor can swoop in and save the day. 

Angel investors are usually wealthy individuals looking to have a seat at the table and be part of the decision-making process. Some may require a stake in your business, but whatever the case, you will get the financing you need for your startup.

To win an angel investor, you need to prove that your business has the potential to generate high returns of investment. As wealthy as they are, they are not looking for an easy way to lose their money. 

However, angel investment is a good option in that it is less risky than applying for, say, a bank loan. Most times, these wealthy people have intelligent business acumen and will understand if the business fails and, therefore, will not demand to be paid back. 

Venture capitalist

A venture capitalist is similar to an angel investor but also differs in some ways. A venture capitalist is someone who believes in your business. They believe your startup will be revolutionary and are willing to help you from the ground up. 

If you can convince a venture capitalist to offer financial support, you are in luck because they are very picky about the types of businesses they support. They are usually looking for businesses with high-growth potential. 

If you are willing to give a percentage of ownership, this is a very viable financing option for your startup. 

Peer-to-peer Lending Networks (Crowdfunding)

Peer-to-peer lending networks are usually a group of people who pool their resources together and loan to borrowers and expect repayment at a later date with interest. 

You may ask yourself, why not just go to the traditional lending institutions? It is because these p2p networks have less strict eligibility requirements. Traditional lending institutions may shun you if they are not convinced by your business idea but not p2p networks. 

If we are honest, repairing your credit score will attract more costs, so it is better to borrow from people who do not judge you for what you lack. You can therefore grow your business with their help and repay them once you are well established.

Merry go round (Chama)

A merry-go-round or a Chama is another excellent way to raise capital for your startup. The best part is that you won’t be owing anyone! 

The merry-go-round brings together a group of like-minded people who contribute a certain amount regularly, and each member is awarded the cumulative amount at different intervals. 

Once it is your turn to collect the lump sum, you can inject it into your business as capital. 

Government Programs that Offer Startup Capital

There are various types of government support available to entrepreneurs, but many people don’t know how to apply for these funds. 

Governments usually have funds dedicated to startups, and businesses are required to meet certain specifications to qualify for the funds. 

For example, Youth Enterprise Development Fund, a flagship project of Vision 2030, is one of the funds set aside by the government of Kenya to support Kenyan youth start and run small businesses. 

All you have to do is apply. Government capital is a great way to fund your startup because it usually comes with incentives such as tax exemptions and zero interest rates. 


So don’t let your million-dollar business idea die an unnatural death. As you have seen, raising capital for your startup doesn’t have to be an uphill task. You just need to look in the right direction, and you will find more than enough financing options. 

If you choose to go with any of the above methods, you should do your due diligence and understand what you are getting yourself into. 

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Doris is a finance professional, freelance writer and SEO expert. She has experience helping businesses of all sizes create content that helps improve their site quality and increase their online traffic. She is a personal finance and wealth creation enthusiast and a frequent contributor to Money254. Visit Doris' personal website to learn more about her work.

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