Fundraising in Kenya

I remember standing outside of our host family house in Nakuru, next to a cow and a few chickens, talking on the phone with a mentor of ours who would soon tell us that he wanted to invest in DUMA. At that point, Christine and I were huddled around the phone figuring out what having an investor would mean, and feeling both excited and terrified.

Competitions are King

As everyone knows, a startup cannot move forward without capital.

Because we started DUMA in University, we were exposed to many opportunities to win money with no strings attached. Sometimes the winnings even came in the form of giant cheques.


DUMA began as a sah-weeeet idea in Startup Weekend, and we took home our first prize money – $750. YESSS. That got us server hosting, and led the way to many other competitions.

Incubation + Free Money = ❤

We were accepted in the spring of 2012 to join Princeton’s first accelerator program through the Keller Center for Entrepreneurship, the eLab. Given that the dream of many Princetonians is to follow their passion of consulting, the eLab needed to incentivize students to stay on campus over the summer rather than go to NYC for internships. They did so with a $4,000 stipend. That’s $8,000. Boom.

Thanks to student groups and entrepreneurship listservs, Christine and I were lucky enough to find out about a few competitions with Ashoka, Intel, and MTVu – which we then won. We even got a mention in Forbes!

With the $20,000 or so we had raised at that point, Christine and I bought round-trip plane tickets to Kenya. September, we landed in Nakuru in our new homes, to launch DUMA.

That’s when we got the phone call in the cow pasture and launched into the world of angel investors.

Calling All Angels

A few things we learned –

1- Company set-up – Angel investors are more likely to invest in US-based companies, so to all the Kenyan startups out there, if you are planning on raising money from outside Kenya, check out a Delaware C Corp.

2- Accredited – If you plan on raising from an institution (eg. VCs) later, you should make sure all your angel investors are accredited, so there are no complications down the line. A lot of crowd-sourcing platforms can cause issues for accreditation, so make sure to check into that before receiving crowd funding.

3- Stage – Angel investors come when you have an idea, but no real product (yet). They believe in your dream and are incredible resources.

For our seed round, we chose to raise with convertible debt. Convertible debt means that you are in debt – but instead of giving them back money, you can also give them back equity stake in your company.

As a note – you can also raise a seed round from a VC, but we didn’t – Cool Kahn Academy video here.

To Debt or Not to Debt

Startups often raise convertible securities (convertible debt or convertible equity, for example) when setting a valuation for your company is a challenge – usually when you are pre-revenue and can’t say – “Well, I’m making $100,000 a year, and typically startups in my vertical ie. e-commerce, hardware, etc. get 5x multiple for their valuation. Therefore, my valuation is $500,000.” (Not that I think early-stage startups should be valued only for revenue multiple).

There are a ton of articles about convertible debt online. You can find some here and here. Just keep in mind a lot of these articles are debating the merits of convertible debt in relation to giant rounds – millions. Your considerations will be different if you are raising $100,000.

Convertible debt is cool because you don’t have to set a valuation. But typically, you do put in a market cap, which you can read about here & here from people much smarter than me. It’s essentially a clause to make sure your convertible debt investors don’t get screwed with a $100M valuation and get 0.00001% equity stake in return for their early belief in you.

So that was our convertible debt round. We LOVE our angels. One, we met at that first startup weekend, one we met at Princeton through technology-for-development circles, and all are family of some sort. And they are super supportive.

Welcome to the Grant Life

At some point, one of our friends from Princeton (shout out, Eleanor!) told us about this awesome opportunity to apply for a grant from the Rockefeller Foundation Centennial Innovation Challenge. This grant targeted companies that leverage SMS technology to help connect informal sector workers to jobs (hello, DUMA!). So we won, along with 9 other mission-driven organizations, and it was great.

Screen Shot 2015-05-15 at 11.48.07 AM

For us, the grant was important because it helped us flesh out our plan for building our SMS-based screening test to pre-screen people for jobs. It could not have been better timing.

Real-time Update!

The next step of our fundraising process is ongoing. We are currently raising a series-seed round. That is a cross between a seed and series round in terms of documentation and legal work. We decided to raise from angels and family funds rather than VCs. The reason we decided not to primarily target funding from VCs for this round is because typically, VCs come in at a later stage, when you have solidified your growth model, and you also typically raise a huge sum of money from VCs (often minimum $1M) in order to grow super quickly. And they usually don’t want to put in too little money, because they want to get a big enough chunk of equity. That being said, certain VCs do put in money at an early stage, and at smaller amounts.

Given our round size and targets to hit from this investment, we weren’t ready for VC yet. So for a Series-A round, yes. And most likely, it will be to expand outside of Kenya.

Wrap Up

So that’s how raised funding! There are multiple ways to go about it but this is our story.

I had a ton of questions around fundraising while were were going through the process initially (and trust me, I still do). So if you are also someone with a lot of questions, write a comment and I’ll get back to you about my thoughts. I am definitely not a professional, so for anything over my head, I can refer you to an article from an expert.

Last Thought

And by the way – remember that you don’t need to raise capital all the time. There are tons of articles about how to raise capital online, but many from investors and VCs – you can see why they would want you to seek funding…right? If you can build an awesome product, get paying clients, and immediately start reinvesting profits into growth, you are good to go!



  1. Hi Arielle, another great post! One question I have is what do you recommend Kenyans do who want to raise capital but don’t have the same networks as you and Christine? A friend shared a great article the other day that highlighted how much of a struggle it is for Kenyan-fronted startups to receive funding in the manners you describe. What can they do to achieve similar levels of amazing?

    1. That’s a great question, Ronda! I agree that it is really hard to get that kind of exposure. And you tend to find your investors in the most unexpected places…Princeton definitely helped us. I do still think there are opportunities to get connected in Nairobi, though. There is a growing community of hubs, incubators, and accelerators where you can bump into people and expand your network. There are more and more foreign investors coming in looking to do something. And while local investors are rare, there always is a chance to locate the diamond in the rough. You just need to be pitching all the time, everywhere you go, and in an approachable way that makes people find you interesting, not annoying 😉 I do believe that some of the challenges startups here face is not just lack of network to link to investors, but also lack of mentorship to help refine pitch. I think colleges/universities need to do a better job of that. I also think tech startups in Kenya need to also realize if you are going to pitch to local investors, you need to have already made sales. So it is definitely a different way of going about it, but I think the opportunity is still there albeit harder to find.

  2. Very great piece but this was a case I point of a lucky startup at the right time and place.. Typically many Kenyan Startups don’t have this kind of opportunities and even if they have its hard to get guys convinced.

    However I did like the point that you mentioned on how you should not run to VCs yet..

    I think what Kenya needs is more Angels taking the risk and more early stage investors who are taking the risk.

    We lack that in our eco system.

    1. Kenju – I’m glad you liked the point about the VCs. I think it’s a mistake a lot of early stage startups make.

      But, I don’t think luck really has anything to do with it. Trust me, we had to work hard to get the investment – pitching all the time to everyone, taking last minute trips to New York to meet with one person on the off-chance they could be helpful in any way.

      There are certainly more people who are angel investing in the tech space who have had experience in tech entrepreneurship, but the attitude “they got lucky, they are American,” and “we are Kenyan, it is hard to find angel investors in Kenya” is definitely not something I would encourage. You’re right, angel investors are lacking. But that doesn’t mean you should stop pitching and trying to find even that one angel that exists here.

      Either way, you do need to work for it. If we’re talking Kenya with limited access to capital, I would stress beginning a startup where you are less dependent on external capital injection, and focus on getting customers. At the end of the day – investment or not, you’ll need to validate the business model. It’s just a question of how fast you do it. I guess my point is – don’t focus on challenges and pray for luck. Make your own luck.

  3. Amazing points for all entrepreneurs out there. It’s true raising cash is not as easy in Kenya unlike other ecosystems. The huge point entrepreneurs should focus on is monetization to meet their opex. Revenues will validate your idea and make you lucky to grow or scale.

    Entrepreneurs should also be ready to go out to sell their businesses to both investors and customers. Just getting dirty in the garage all night won’t take your product to market or acquire you customers. An awesome product needs an awesome product devt, marketing and PR team to take the word out, an awesome management team to earn and maintain investor confidence and as well help position the product in the market and acquire loads of customers.
    Most startups I have met lack 4 pillars and can’t ship the product, can’t market it, can’t convince anyone to put a dime into them.

    Therefore, as much as we complain of lack of angels and VCs, entrepreneurs should look at having team members that complement each other and focus blindly on the product, the market and growth and not the money. Money is a measure of value. Customers will be initial investors as they pay for the value they get out of the product.

    Bootstrap. No investor wants to give you money to just get by, pay your bills and wages and fund your lifestyle. VC is a business. Go to market, get some revenue, get feedback improve the product and go back big and better without compromise on quality. Don’t just raise money to be another unicorn, set structures that will ensure growth on a budget.

    1. “Don’t just raise money to be another unicorn, set structures that will ensure growth on a budget” – well said, Sam. Thanks for your thoughts!

  4. This is an instructive description of the startup fundraising process. It requires understanding what you need to get off the ground, the possible sources of funding for a startup like yours, passion, persuasiveness, and persistence, and (yes) some luck.

    Write on…

  5. Love this! thanks for describing your journey. have a feeling this is going to be a good post to come back to 🙂

  6. Pingback: Dumaworks - Blog

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