Kenya’s Startup Paradox: Why Promising Companies Fail Despite Strong Funding

The recent administration of Twiga Foods, a B2B platform that raised $185 million from prominent investors like Goldman Sachs and the IFC, underscores deeper structural challenges facing Kenya’s tech ecosystem. While Kenya has attracted significant venture capital—$984 million in 2023 alone—it lags behind peers like Nigeria, South Africa, and Egypt in producing billion-dollar companies or unicorns.

The funding profile reveals a concentration in asset-heavy sectors like energy (solar home systems, electric motorcycles) which account for nearly 70% of venture capital. This contrasts with the equity-fueled scaling typically required for unicorn status—the kind of growth seen in consumer internet, fintech, and software companies.

A Pattern of High-Profile Failures

Twiga’s struggles follow a similar path to other well-funded Kenyan startups:

  • Copia Global: Rural e-commerce platform that raised $123 million before entering administration
  • Koko Networks: Clean-cooking company backed by Microsoft and the World Bank, shut down after government policy changes cut off revenue
  • Lipa Later: Buy-now-pay-later fintech that reached a near-$100 million valuation before seeking administration
  • Sendy: Logistics startup valued over $80 million became insolvent after an investor pulled out
  • Gro Intelligence: Agriculture data company with an $850 million valuation closed after missing payroll
  • MarketForce: Another notable B2B e-commerce player that had to shut down

These failures suggest a common thread: capital-intensive business models struggling in markets with low margins and informal competition.

Limited Domestic Investment

Beyond the funding mix, Kenya’s lack of local institutional investors creates vulnerability. Unlike ecosystems where domestic capital can cushion startups through downturns, Kenyan companies rely heavily on foreign VC sentiment—which proved volatile when funding dropped 33% in 2024 amid political uncertainty.

Without local backing and limited exit opportunities, the cycle continues: foreign investors seek returns elsewhere, further reducing domestic capacity to support future ventures. Twiga’s administration serves as a stark reminder of this structural challenge—one that Kenya must address if it hopes to build a more resilient tech ecosystem.