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Esther Ndeti: Startup Investment is More Than Just a Transfer of Funds

Startup investment is more than just a transfer of funds, there needs to be a transfer of skills or some form of value-added post-investment.

The Secretariat of Science Technology and Innovation (STI) in the Office of the President which is taking the lead in integrating STI into the national economy in order to drive development, organized a 4-day National Science Week which span a series of events including a public exhibition showcasing Ugandan innovations, an Investor Summit, and various topical panel discussions.

The event which successfully ended on Nov. 10 had an Investor Summit as one of the key events to address the challenge of funding for early-stage science, technology, and innovation ventures. The summit gathered key financial players including venture capitalists and commercial banks, among others.

Prior to the summit, Dr. Monica Musenero, the Minister of Science, Technology, and Innovation said the government is proactively paving the way for science, technology, and innovation startups to secure the funding they require for viable projects. “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,” Dr. Musenero said at the time of opening the National Science Week on Nov. 7th at the Kololo Independence Grounds.

Investors in early-stage startups have been asked to expand their support to science and technology-based businesses beyond funding to incorporating transfers of skills or value addition post-investment.

Ms. Esther Ndeti, the Investment Principle at Unconventional Capital (UnCap) said the investment is more than just a transfer of funds. For early-stage investors, she said that there needs to be a transfer of skills or some form of value-added post-investment

“There is a limited number of investors who have the skills to evaluate all the components of innovation-based businesses and even fewer who work with such businesses in emerging markets,” Ndeti further explained.

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 customized products for innovation, which causes an overarching funding gap in the tech startup space.

According to Disrupt Africa’s annual African Tech Startups Funding Report, Uganda is one of the fastest-growing startup funding destinations in Africa, having registered growth with the likes of Zimbabwe, Rwanda, and the 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 USD$330 billion (approx. UGX1.2 quadrillion) funding gap, according to the World Bank

Ndeti noted that some of the challenges early-stage startup innovators face include limited awareness of the variety of investors, other opportunities available to them, insufficient collateral for debt financing from traditional financing institutions, and perception-based hindrances based on the fact that women & youth-led businesses attract cultural biases which limits capital they receive.

The 2019 Global Innovation Index ranked Uganda 102 out of 129 countries, lagging behind Kenya, Rwanda, and Tanzania in 77th, 94th, and 97th place, respectively.

The concluded 2022 National Science Week gathered over 200 exhibitors — specifically in the fields of the Pathogen Economy. Aeronautics and Space Science, The Future of Infrastructure, Industry 4.0, Mobility and Productivity Acceleration, Import Substitution, Export Promotion, and the science of support services are showcasing innovations such as vaccine development, robotics, agricultural value addition, food products, pesticides, the future of green mobility through automotive innovation, and vehicle manufacturing, among others.

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