Founder’s Guide to Fundraising in Zambia

Startups are a key driver of economic growth and digital transformation in Africa. Investment in Africa’s startup founders is on the rise. Disclosed funding is on its way to $4bn in 2022. The innovation and startup ecosystem in Zambia has followed this trajectory. Zambia was one of the early movers in innovation and technology. Since 2015, 23 startups have raised more than $75m in disclosing funding. Zambia’s investment space is also growing to support more fundraising stages for startups. Recently a local angel network was established targeting early-stage startups. 

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 and guidance is that the information is either absent or not anchored within the realities of the ecosystem.

In response to this, BongoHive in partnership with the GIZ project Make-IT in Africa and Briter Bridges has developed guidance for early-stage startups looking to fundraise in Zambia. The Founder’s Guide to Fundraising in Zambia brings together lessons and best practices on fundraising in Africa, information on the preferences and focus of investors in Zambia and insights on the funding and technical support available to startups operating in Zambia. The guide aims to provide startups with the information they need to successfully raise funds.

The guide identified four key insights that every founder looking to fundraise in Zambia should know. 

1. Zambia has one of the most favourable regulatory environments for startups and investors. 

• Zambia receives the second-highest foreign investment in Southern Africa. A major driver of this is the lack of exchange controls, capital gains tax and restrictions for shareholders to repatriate their money when they invest in Zambia. Further, unlike in other countries in Africa, SAFE notes are allowed.

• For startups, particularly those in the financial sector, regulators have created a favourable environment to test and learn. Both the Securities and Exchange Commission and the Bank of Zambia have regulatory sandboxes for testing new products without requiring regulatory licences. 

2. Funders are emerging across all investment stages for startups. 

• Zambia has always had a mature private equity market which has driven a number of larger deals in the startup ecosystem. Increasingly, early-stage investors are emerging that can build the pipeline for these PE firms. Zambia has recently launched a local Angels Network to support early-stage startups and more international VCs are seeing investable opportunities in the space, specifically for cleantech and fintech.  

• There are several accelerators that are looking to add financial support to their existing technical support. This is much needed in a country where interest rates for debt financing can exceed 6% annually and more. 

3. Zambia has a growing local ecosystem that is increasingly attracting local players, but remains concentrated in Lusaka. 

• Zambia is home to the second largest support ecosystem in Southern Africa. Its local hubs, accelerators and incubators support startups through a combination of financial and non-financial support. However, they are all located in Lusaka. 

• Increasingly, these support organisations are attracting corporates and getting them involved. In turn, these corporations are beginning to support the ecosystem with their own incubators, particularly those in the financial sector. To date, this support has mostly been seen by banks. 

4. Zambia has a large number of support organisations targeting female entrepreneurs. 

• Zambia is a leader in Africa when it comes to addressing the gender gap in investment for startups. Startups with at least one female founder raised more than 50% of the total disclosed funding into startups in Zambia since 2015. These female founders are supported by a strong network of support organisations ranging from government initiatives and non-profits to industry-led incubators and accelerators.