A Guide to Financing Your Startup in Ethiopia

An innovative idea, a validated business model, a qualified team, and a seamless execution plan are important ingredients to launching

June 25, 2021

Bethel Tesfaye

Addis Ababa, Ethiopia

An innovative idea, a validated business model, a qualified team, and a seamless execution plan are important ingredients to launching a new business. But without the right amount of finance to fuel operations, a great idea will just be that – a great idea.

Acquiring finance is one of the most important tasks in a startup’s journey. There are multiple sources to finance a startup like founders’ savings, friends & families, loans from financial institutions, angel investors, and venture capital firms. In addition, startups can raise investment from startup support programs like incubation-acceleration firms and grants or competitions.

Shega’s ongoing research on the Ethiopian startup investment landscape indicates that more than 40 startups have raised funding in 2021 so far. This is already is higher than last year’s total number of funding and proof of the country’s growing startup ecosystem. However many startups still face challenges finding investors for their business.

In this piece, we take a look at various sources that can fund your startup in Ethiopia.

Angel Investors

Angels are individuals that invest money in early-stage startups. Angels are called angels because of the high-risk pre-seed or seed investments they make. These individuals usually invest in return for equity ownership.

Angel Investors have been an active source of finance for Ethiopian startups. Many startups like Deliver Addis and Ride were backed by Angels at their early stage. You may run into Ethiopian Angels on startup and innovation summits, networking events, and even LinkedIn, so make sure you are always pitch ready.

Angel Networks

An angel network is a collection of individual angel investors who comes together to invest in startups collectively or individually. Angel networks or angel groups help individual angel investors find promising startups easily. In addition, angels also get helpful insight from fellow angels in the network to make better investment decisions.

Below is a list of angel networks that are active in Ethiopia.

Addis Ababa Angels (AAA)

AAA is Ethiopia’s first angel network established by local investors. Local angels Shem Asfaw, Henok Assefa, Addis Alemayehou, Adam Abate, Yosef Kibur, Amaha Bekele and Levi Girma are the 6 members of the AAA.

The network focuses on early-stage startups that are both pre & post-revenue. It invests in scalable, tech and tech-enabled businesses. The angels highly encourage a startup to be composed of more than 2 people and team members to have complementary skills.

The AAA has made two official investments since its establishment in 2019. The network has invested in Across Express in 2020 and Eshi Express in June of 2021.

RENEW – Impact Angel Network

RENEW is an Investment adviser that operates teams in Ethiopia and other East African countries. RENEW primarily invests in Small and Medium Enterprises (SMEs) but have previously backed a tech startup in Ethiopia.

RENEW manages an angel network called Impact Angel Network (IAN). RENEW IAN has invested in Deliver Addis in three rounds since 2017. RENEW IAN also invests in SME’s with social impact and has invested in dozens of Ethiopian companies including East African Emergency Services (Tebita) and dVentus Technologies.

Investment, Holding and Venture Capital Firms

Betam Group Holdings

Betam is a family-owned investment and holdings company. It invests in early-stage African startups. Betam has previously invested in Orbit Health, an Ethiopian health-tech startup, and ZayRide a ride-hailing service provider based in Ethiopia.

Kazana Group

Kazana Group is a privately owned holding company. The group is owned by Addis Alemayhou CEO of 251 Communications and also a member of the AAA.

Kazana holds a portfolio of 13 companies. Avetol, Sira App, Jemla App, and Bana Music are some of the companies under Kazana.

The Baobab Network

The Baobab Network is a tech-accelerator that backs early-stage technology start-ups in Africa. The network provides startups with $25,000 seed funding. In addition, it offers a tailor-made accelerator program and gives startups access to a network of partners and investors.

Baobab has invested in two Ethiopian startups,

Quick Links

#Incubator #Seed Funding #VC

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Bethel Tesfaye

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