Despite Kenya’s reputation as a startup hub, a new report has revealed that early-stage funding remains highly concentrated in urban, foreign, male-led, and familiar.
According to the latest findings from the Startup Ecosystem Equity Index, more than 80 per cent of all startup funding in Kenya is sourced from foreign investors, mostly based in Europe and the United States. This means the capital driving Kenyan innovation often comes with external expectations and priorities.
“The people writing the cheques don’t live here, and the vision they fund doesn’t always reflect grassroots realities,” the report stated.
In terms of location, the data paints a skewed picture, with 94 per cent of funded startups are based in Nairobi, leaving innovators in towns like Bungoma, Lodwar, and Kitui at the fringes of investor attention.
“Innovation is happening across the country, but the funding pipeline is locked inside a Nairobi bubble,” said researcher Angela Kibe, one of the contributors to the study.
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The bias doesn’t stop at geography. Just 10 percent of funding went to first-time founders, suggesting entrenched networks continue to recycle capital among serial entrepreneurs already known to the ecosystem.
Fintech and e-commerce ventures dominate investment interest, capturing the bulk of available capital. Meanwhile, sectors addressing critical local challenges such as agriculture, climate resilience, and primary healthcare are sidelined.
Startups led by women continue to be left behind. The report found that less than 10 percent of all capital went to women-led companies, even though female founders are consistently active across multiple sectors.
“This isn’t a pipeline problem. It’s a gatekeeping problem,” said Kibe, calling for deliberate reforms in investor selection, mentorship access, and due diligence practices.
Even more troubling is the absence of local capital in the ecosystem. Kenyan banks, institutional investors, and high-net-worth individuals remain largely inactive in funding innovation at scale.
Most early-stage entrepreneurs continue to rely on grants and short-term donor programs, with little structural support to transition into scalable ventures.
