Investors in early-stage start-ups should expand their support to science and technology-based businesses beyond funding to incorporating transfers of skills or value addition post-investment.
While delivering the keynote address during the Investor Summit of the 2022 National Science Week at the Kololo Ceremonial Grounds, Esther Ndeti, the Investment Principle at Unconventional Capital (UnCap), said innovation-based businesses have a limited number of investors who have the skills to evaluate all the components of the companies and even fewer who work with such businesses in emerging markets.
She noted that investment is more than just a transfer of funds, saying, “For early-stage investors, there needs to be a transfer of skills or some form of value-added post-investment.”
She added that most investors don’t have enough scientists or tech-based leaders within their teams to accurately assess and add value to innovation-based businesses and that banks, for example, rarely offer customised products for innovation, which causes an overarching funding gap in the tech start-up space.
According to Disrupt Africa’s annual African Tech Startups Funding Report, Uganda is one of the fastest-growing start-up funding destinations in Africa, having registered growth with the likes of Zimbabwe, Rwanda and Ivory Coast.
Despite this growth, however, early-stage science and technology-based businesses still face significant challenges in accessing financing as part of the sub-Saharan Africa SME ecosystem, which faces a $330 billion funding gap, according to the World Bank.
According to Ndeti, some of the challenges faced include early-stage startup innovators include having limited awareness of the variety of investors, products and other opportunities available to them; insufficient collateral for debt financing from traditional financing institutions and; perception-based hindrances based on the fact that women- and youth-led businesses attract cultural biases which limits capital they receive.
Speaking during the forum’s opening ceremony, Dr Monica Musenero, the Minister of Science, Technology and Innovation, said: “We are proactively paving the way for our science, technology and innovation start-ups to secure the funding they require for viable projects. Through this event, we will act as a bridge and provide a platform for innovators to pitch their ideas to potential investors and secure the support they need.”
