Rwandan entrepreneurs in the startup ecosystem stand at the threshold of transforming the country’s economic, social, and technological landscape if their funding needs are met.
Funding for domestic startups currently remains a key limitation to innovation. In particular, the shortage of funding impedes early-stage startup growth and threatens their survival.
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Among the efforts put in place to address the issue is the Rwanda Innovation Fund, a venture capital fund launched in 2021, with a $30 million loan from the African Development Bank. The fund, managed by Angaza Capital, laid out hopes to attract another $30 million from private backers, with approximately $8.6 million from the Rwandan government.
The goal was to invest in 150 startups, incubators, and accelerators across Africa.
By November 2023, $6.6 million had been disbursed to 11 East African startups.
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Angela Homsi, the Angaza Capital president, on Wednesday, April 24, maintained that the mission is to back disruptive and innovative companies that deploy solutions to solve major sustainability challenges in Africa.
It is a fund, Homsi insisted, that "only invests in the very best entrepreneurs and startups.”
She did not, however, seem open to discuss whether the fund deliberately invested in empowering local startups.
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The fund currently boasts a portfolio of 12 startups, majority of which are regional.
What is the missing link?
Angelo Gitego, the chief executive at Xanahealth ( former IvuliroTech), argues that there is a need to tailor some of the big initiatives such as the Rwanda Innovation Fund to local needs to allow for more domestic players to benefit.
IvuliroTech is an electronic medical records system that eliminates the use of paper in hospitals, streamlining service delivery, and creating positive experiences for both hospital staff and patients.
Gitego said some of the funding criteria considered are not "realistic” given the size of the local startups. An example is the condition that the fund demands startups to demonstrate annual revenue between $50,000 and $5 million.
"If you want to address the funding gap, you need to contextualize the initiative with the local market. In Rwanda, you will not get more than 10 startups that can make a profit of over $1 million every year. But this is one of the criteria,” he said.
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Rwanda Innovation Fund invests between $250,000 to $5 million in each company and works alongside the government in managing a technical assistance facility to boost hands-on support to companies throughout their various stages of growth.
Viebeg Medical, a regional startup that digitises healthcare supply chains, is one of the beneficiaries of the fund. It raised $560,000 from the fund in two separate rounds.
"They invested in both our financing rounds. The initial investment was around $160,000 and the second was $400,000 bringing the total to $560,000,” Tobias Reiter, the company’s chief executive and co-founder, said.
Reiter asserts that Rwandan startups have the opportunity to capitalize on growing funding initiatives.
"We continue to see startup programmes, which are opening doors for more entrepreneurs to access funding. Rwandan startups can capitalize on such initiatives to gain traction and hence compete for sizeable funding,” he added.
Scalable solutions
For Remy Muhire, whose startup, Pindo, recently secured ‘undisclosed’ funding from Rwanda Innovation Fund, entrepreneurs need to transition from common technology solutions to scalable solutions, to be able to attract huge rounds of financing from venture capitalists.
"I am optimistic that we will see more local players get access to funding. You need to be a profitable business and of course with a high scalability potential,” Muhire, the company’s chief executive, said.
Muhire argues that local entrepreneurs should think beyond borders.
For instance, he said, it would be hard for a local firm to compete with a global company that provides the same service.
"We have startups coming up. If we don't have entrepreneurs thinking about scalable solutions to the region, it is going to be hard. We ought to build something scalable. In some of these countries, there is a greater purchasing power,” he said.
Muhire told The New Times that Pindo, an instant communication platform for businesses optimized for developers, is scaling to Kenya and Uganda, as part of the agenda to serve the region.