Posted by: beninmwangi | November 24, 2007

How Do African Businesses Get Start Up Capital?

Hi again, sorry again for the long pause. It seems to be occurring more than what I would like, but things have been moving at whirlwind pace recently.

Anyway, this is a question for all of you entrepreneurs, business students, professors, and others in the know on the inner workings of start ups in Africa. How did you or someone that you know get start up funds?

My conjecture is that it would go something like this with the most common sources of funding starting at the top:

Often times in my reading the biggest obstacle outside of weak infrastructure cited as a deterrent to entrepreneurs in Africa is the scarcity of start up capital, many of my acquaintances have echoed this sentiment. What I wonder is if there is a way that, with today’s technology, the start up capital reservoirs in Africa can be widened to the extent that a really good entrepreneur lacking personal funding or powerful connections can do more than just ask family and friends for start up capital (without necessarily having to fall under the umbrella of micro finance).

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Responses

  1. The most accessible source of funding for start-ups in Nigeria and Africa as a whole is personal savings. Though one may be able to get some funding from family. The truth is that most banks are not willing to fund business ideas because they want to see result first and this means that you have to start somehow and get your result before even thinking seeking for external fund.

    I started http://www.nairahost.com (www.nairahost.com.ng) with two other young Nigerians from our savings. It was tough but we chose to go that route as we were not even sure people were willing to invest in such business idea in the country.

    There is a story I read about one of the fast food joints in Nigeria. The founder needed just about N2million to start her business then but she was refused by several banks. She, however, was able to get some funding from her family friends and started the business. Few years down the line, these same banks that had refused her funding were her around with funds. They were willing to fund any expansion plan she might have.

  2. […] question from Benin Mwangi: How Do African Businesses Get Start Up Capital? He also announces The Cheetah Index. The Cheetah Index derives both its name and inspiration from […]

  3. http://allafrica.com/stories/200711270807.html

  4. Great article, Omodudu! Guess we are one step closer to crossing out bank loans for the small market players.

    Do you think that this scenario of smaller customers in effect subsidizing larger banking customers plays out across the continent?

  5. What impact has the recent recapitalization of the banking sectors had on project financing. I believe, a vibrant banking sector, should be a good lunching pad for investment finance.


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