Founder’s Guide to Fundraising in Tanzania
Investment into Africa’s startups is on the rise. Disclosed funding is on its way to $4bn in 2022. While the headlines often focus on a few big markets such as Egypt, Kenya, Nigeria and South Africa, many other markets are also making strides. Tanzania is one such market. The figure below shows that since 2015, 27 startups have raised more than $58m in disclosed funding. More than 5 startups have raised more than $1m. Despite this growth, funding remains out of reach for a large portion of startups. This is a particular issue for early-stage startups who are balancing the competing needs of building and funding the business. What we hear from these founders is that they have limited time and resources and they need more support in navigating their local ecosystems to access financial and technical support to grow their businesses. The challenge with the existing support is that information is either absent or not anchored within the realities of the ecosystem.
In response to this, Sahara Ventures in partnership with the GIZ project Make-IT in Africa and Briter Bridges has developed guidance for early-stage startups looking to fundraise in Tanzania. The Founder’s Guide to Fundraising in Tanzania brings together lessons and best practices on fundraising in Africa, information on the preferences and focus of investors in Tanzania startups and insights on the funding and technical support available to startups operating in Tanzania. The guide, anchored in the unique context of Tanzania, aims to provide startups with the information they need to successfully raise funds.
Founder’s Guide to Fundraising in Tanzania
The guide identified three key insights that every founder looking to fundraising in Tanzania should know.
1. The innovation and startup ecosystem has been growing fast, but remains reliant on donors and global investors.
Startup founders in Tanzania mostly rely on grants as a source of funding at the early-stage and private equity funds at later stages. To raise grants, founders need to be alert to different opportunities emerging from the ecosystem, especially from development partner programmes for early-stage entrepreneurs and innovators.
To raise later stage financing, founders need to build strong regional and global networks since the private equity and venture capital landscape in the country is still at a very nascent stage. One way to do that is by attending regional and global startup and investor meetups. These platforms provide unique opportunities to meet with key ecosystem movers and shakers.
Founders also gain exposure by working with founders from other countries, attracting strategic partnerships.
2. There is an increasing degree of specialisation amongst ESOs working with donors and public local funds to support different SDGs.
Depending on the sector you work in, as a founder, it is essential to understand different programmes implemented by ESOs and donors to support startups and early-stage businesses in Tanzania. For example, the Amua Accelerator targets solutions in the sexual reproductive health (SRH) sector where as the Lishe Startup Accelerator targets nutrition-sensitive and food-tech solutions.
There are also different funds to support grassroots innovators and entrepreneurs across multiple sectors championed by development agencies in partnership with public institutions, e.g. UNDP Funguo or the government's MAKISATU.
3. There are no specific regulations targeting startups or investors, but several existing regulations impact on fundraising.
Founders should familiarise themselves with regulations that govern international investors, if looking to raise capital from regional and global investors outside the country.
It is also useful to review existing Fair Competition Commission, immigration, and capital gain tax regulations since they directly influence the chances of raising capital.
Also, issues around IP and patenting for high-tech solutions need to be considered. The IP and patent ecosystem are not yet mature; hence there is a need to engage lawyers and experts in the area, especially if looking to capitalise on regional and global markets.