How EIB programme is helping startups to scale connectivity, boost growth

Samuel Munguti, founder and chief executive officer of agri-tech firm Shamba Pride, knows very well what injection of credit can do to a business that is eager to scale up.

The company works with small agro dealers called Digi Shops and smallholder farmers to ensure they get the necessary farm input, training, and market access, among other services. 

“For us, at Shamba Pride, we felt we needed funds and financial partners like European Investment Bank (EIB), and we felt that such funds are important, especially to local early-stage businesses' capital needs, which are very important to spur development,” said Munguti during a recent interview.

"Beyond the capital that Seedstars African Ventures deployed to Shamba Pride, we have really benefited as a business.  Our first cheque was worth $500,000 (Sh64.7 million) and to me, that unlocked a lot of opportunities for Shamba Pride.”

Munguti said after getting the funding, within three years from 2021, they grew their revenue from Sh5 million to close to Sh300 million, and have established departments like the head of finance and increased employees from four within three years to 40.

The company uses technology to offer services to farmers and agro dealers, and now it has 80,000 farmers across the country with a network of 4,000 agro dealer shops at different levels of partnerships.

Munguti is among the beneficiaries of Boost Africa, a joint initiative of the African Development Bank (AfDB) and the European Investment Bank (EIB).

Other beneficiaries in the country include Poa Internet, a local internet service provider that is supplying wireless internet at an affordable cost in Nairobi’s informal settlements, Turaco Digital Insurance, a micro insurance company, Ampersand and ZENO Investments, among others.

It seeks to address funding challenges by creating opportunities for young women and men in Africa who want to start or are already in businesses.

Launched in 2016, the programme, which has a strong focus on youth and women-led businesses, received financial support in 2020 from the European Commission and the Organisation of African, Caribbean and Pacific States Secretariat (OACPS) under the 11th European Development Fund (EDF).

Boost Africa stems from the belief that supporting entrepreneurship and innovation leads to higher living standards and social progress in Africa.

It supports affordable solutions for the poorest populations, from access to energy and healthcare to financial services, education and internet connectivity.

The programme also supports start-ups to sustain the democratisation of the economy and create opportunities for all.

It supports the creation of decent jobs, sustainable growth and poverty alleviation and helps achieve the Sustainable Development Goals (SDGs) through venture capital and technical assistance for young businesses in sub-Saharan Africa.

The programme works with several venture capital (VC) including Seedstars Africa Ventures, AfricaInvest, among others, to disburse funding.

Headquartered in Tunisia with a strong presence in North Africa with offices in Nigeria, Abidjan and Nairobi, AfricaInvest has so far raised over $2.7 billion (Sh349 billion) and today invests between $30 million (Sh3.9 billion) to $50 million (Sh6.5 billion) with funding from EIB, among others, according to AfricaInvest East Africa Managing Director George Odo.

“It enables investors like us to work with companies that would ordinarily not feature because they're high risk,” said Odo during a recent interview on our sister Radio station, Spice FM’s Situation Room show.

“They're mostly early-stage startups, so the Boost Africa program by EIB was one of the big investors in our funds. Apart from giving us commercial capital to invest in the fund, they also gave us what we call technical assistance grants to help us train and get the businesses investment-ready.”

Odo said that currently, they have about 15 companies in their investment fund that they are supporting.

He said so far, more than 70 companies have been supported, with many growing fast, creating jobs and revenues and expect to support 120 companies by the end of the first phase of the programme.

Turcaco has partnered with M-Kopa to support devices and medical insurance when you buy a smartphone.

Customers who purchase an M-Kopa-branded smartphone automatically receive 12 months of free inpatient health coverage in public and private hospitals at a cost of Sh1,000 for each night they spend in an admission facility.

According to Head of EIB Global's Regional Representation East Africa Edward Claessen, they are not only providing funding to private sector development, but also grants and technical support, thus presenting a unique proposition.

He says Boost Africa seeks to help bridge the existing financial gap in venture funding in Africa, while at the same time offering young entrepreneurs in Kenya and Africa the technical and capacity-building support to launch and grow innovative business ideas sustainably.

“At a higher level, Boost Africa is supporting incubators, accelerators, early-stage and growth stage fund managers who then, in turn, invest in companies from the inception stage to the growth stage, to more mature companies,” said Claessen during a recent interview on Spice FM’s Situation Room.

He said Africa lags in getting capital financing, currently at only two per cent, due to perceived risks and lack of ready bankable businesses, which need to be addressed.

This is despite Kenya being ranked as the top destination in Africa for venture capital funding in 2024 due to its strong entrepreneurial ecosystem and favourable frameworks for investment and technological advances.

Claessen said Boost Africa is aligned with the EU’s Global Gateway strategy that seeks to support the private sector in sustainable economic development and the creation of sustainable jobs.

He said they have made an investment in six venture capitalist funds, which are supporting businesses with funding.

They include Seedstars Africa Venture, TLcom Tide Africa, Partech Africa Venture Capital Fund, Janngo Capital Startup Fund, Atlantic Venture Capital Fund and AfricInvest.

Together with other partners, he said EIB has invested Euros 78 million (Sh11.7 billion) in Boost Africa, which has in turn encouraged other private investors to bring in nearly Euros 482 million (Sh72 billion) for investing in African companies, and more than 70 firms have been supported and 15,000 jobs created.

He said so far, more than 70 companies have been supported, with many growing fast, creating revenues and 15,000 jobs and expect to support 120 companies by the end of the first phase of the programme.

“We have had to find a way to attract private sector money into these venture capital funds since the amount of capital needed is extensive. At Boost Africa, our unique approach to mobilising capital is by investing in funds by structuring a junior tranche, which means that as EIB, we commit to taking on some losses if there are, therefore de-risking the other private sectors who have put their money in the venture funds,” said Claessen.

“And should there be more profits, then we take less of the profits, and give more to these other private investors."

The initiative, Claessen noted, supports innovation in sectors like logistics, health, education, agribusiness, renewable energy, financial services and inclusion, digital, and the creative industry, like music and art, all within the common pot of African innovation.

He said the good news is that a successive programme has already been discussed and is expected to be launched next year, and will be double in size.

According to Bruce Nsereko-Lule, the General Partner at Seedstars Ventures Africa, their funding ticket size ranges from $500,000 (Sh64.7 million) to $2 million (Sh258 million), but sometimes can grow up to $5 million (Sh645 million).

“We normally have a tenure of 10 years before exit, sitting on boards of companies that we invest in and help them think about business strategies, execution and development,” said Nsereko-Lule.

In late 2023, Seedstars Ventures Africa received a $$30 million (Sh3.9 billion) equity investment by EIB Global to fund businesses.

He said that lack of long-term vision, corporate governance issues are common problems affecting startups in Kenya, Africa and across the world.

Nsereko-Lule said that in Africa, he sees potential for growth of Small and Medium Enterprises (SMEs) in the future lies in financial services, insurance, education and healthcare sectors.

In January 2022, Seedstars Africa Venture helped Poa Internet secure $28 million (Sh3.6 billion) in a Series C round led by Africa50, followed by a $ 4 million (Sh519 million) debt investment from Finnfund in August this year.

The money was backed by the European Union through $20 million (Sh2.6 billion) from the ACP Trust Fund and $10 million (Sh1.3 billion) from Boost Africa.

In January last year, EIB invested $30 million (Sh3.9 billion) in Seedstars Africa Ventures to fund entrepreneurs in Africa. The EIB Global, which is the EIB Group’s arm, targets to support Sh100 billion in investments by the end of 2027.