Inside the Silicon Savannah: A Brief Look at Kenya’s Tech Ecosystem

Africa’s tech space is nascent compared to its counterparts in the U.S., Europe, and Asia, but it’s growing rapidly. It just so happens that Kenya, the venue of the 12th edition of the Africa Fintech Summit, is one of the four stand-out performers leading the rise of the continent's tech sector to prominence.?

Sometimes referred to as “The Big Four,” Nigeria, South Africa, Kenya, and Egypt are considered to be Africa’s most advanced tech ecosystems. For instance, they continue to attract the most funding, with the quartet collectively accounting for 87% of the startup funding secured by Africa in 2023. These countries also lead in the provision of regulatory oversight and public and private sector support that foster innovation. Unsurprisingly, they are home to some of the continent’s most successful startups and tech-enabled products, including Flutterwave, Paystack, Interswitch, Yoco, M-PESA, Fawry, and others.?

In keeping with some of the key engagements happening today at #AFTSNairobi2024, including the two ecosystem tours titled “Investing in Kenya” and “Expanding into Kenya” and the AlphaExpo Startup Pitch Competition, this piece briefly examines Kenya’s tech landscape.

Local Startup Ecosystem Outlook?

Kenya boasts a relatively young but vibrant startup ecosystem. With over 1000 upstarts across different sectors, Kenya’s startup scene is ranked 63rd in the world and 3rd in Africa, behind only South Africa and Mauritius, according to the 2024 Global Startup Ecosystem Index, having recorded tremendous growth over the past decade.

Unsurprisingly, Nairobi is the country’s tech and startup hub and is considered the 113th top startup ecosystem (city-focused ranking) globally and 3rd in Africa, behind Lagos (70th) and Cairo (97th). Kenya’s position as a leading African tech hub is even more impressive when its population of about 55 million is compared to that of other frontliners in Africa, such as Nigeria (200M+) and Egypt (100M+).?

Startup success and growth stories coming out of Kenya are key reasons why the country’s tech space is so highly rated. For instance, the Safaricom-owned mobile money service, M-PESA, one of the biggest African fintech success stories, has its roots in the East African country.?

Launched in 2007, M-PESA began as a mobile money service that allowed people to send and receive money via texting and swap this digital balance for cash and vice versa at authorized agents without needing a regular bank account. The requirements? A nominal mobile phone and a SIM card. It was an instant hit.?

According to former Cabinet Secretary Joe Mucheru of Kenya's Ministry of ICT, M-PESA hit its 10-year adoption projection in its first year, snapping up its first 250,000 users within the first few months of launch. 17 years later, it now has 60 million customers across 7 African countries and has grown into a suite of financial services for consumers and businesses, processing 150 million daily transactions valued at $1B and $4B in annual cross-border transactions. It also delivers $6.3B across 270 million loans yearly while serving almost a million merchants.?

Another notable player is M-KOPA. Named among the fastest-growing companies in Africa by the Financial Times in 2022, 2023, and 2024, the asset financing startup also made it to TIME’s 100 Most Influential Companies in ‘23 and ‘24. However, perhaps the biggest indicators of its impact are its landmark moves and impressive numbers.?

The company, which also operates in Uganda, Nigeria, and Ghana, launched Kenya’s first-ever smartphone assembly plant in Q1 2023, producing 100,000 units per month and bagged over $250 million in equity and debt funding by Q2 — particularly impressive considering this happened in the thick of the global funding slowdown. Based on its end-of-year report for 2023, it hit 3 million customers in that same period and clocked $1 billion in credit disbursed since inception.

M-PESA and M-KOPA are only two case studies from a vibrant Kenyan startup ecosystem that features several high-flyers. Kenyan B2B e-commerce company Wasoko, one of Africa’s biggest startups in its sector, having bagged $300 million in gross merchandise value in 2022—the year it was also named Africa’s fastest growing company—recently completed a merger with MaxAB, another African e-commerce giant. This has created a network of over 450,000 African B2B informal retailers — the continent’s largest yet. The likes of Lipa Later, Turaco, and Twiga Foods are other examples of fast-growing Kenyan enterprises blazing the trail.

Funding Activity

One of the reasons Kenya is regarded as a vibrant African tech hub is because of the steady growth of investor interest over the years. As mentioned earlier, this has also comfortably placed the Silicon Savannah amongst the top four most funded startup ecosystems in Africa, alongside Nigeria, South Africa, and Egypt.

Since 2021, Kenyan startups have raised more than $2 billion in funding. The country secured the fourth most funding in Africa in 2021 with $420M, and this jumped to $1.1B in 2022, placing it behind only Nigeria in Africa. VC activity began slowing down in 2022 globally, and this intensified in 2023. But while Kenya did record a decline in funding in 2023, its $800M (91% of East Africa’s capital injection and 28% of the continent’s total) was the highest recorded on the continent, signifying sustained investor interest even in the midst of a downturn.

Data shows that Kenya carried that momentum into 2024. Its startups secured the highest share ($200.5M) of the $580.7M raised by African ventures in the first half of 2024 while accounting for 17.9% of the startups involved in the disclosed deals, second to only Egypt. Despite the heavy presence of debt capital and large rounds going to a few startups, the general feeling is that Kenya is looking more and more attractive to investors. Since then, new funding announcements like WorkPay’s $5 million Series A round, which saw participation from Visa, have added to Kenya’s 2024 haul.?

Choice Destination for Leading Companies

Beyond investor interest in startups, innovators across Africa and the globe are also becoming more eager to invest in Kenya by setting up shop in the heartbeat of East Africa. Startups recognize the viability of the Kenyan market, and there has been a flurry of expansion efforts into the region from notable names, including Paystack and Thrive Agric.

Keen interest from global tech juggernauts is also not lacking, as Nairobi houses regional offices of big-time players like Google, Microsoft, Samsung, and Intel. It has also become one of the choice sites of global players to set up other critical initiatives and infrastructure. For instance, Visa set up an Innovation Studio in Nairobi in 2022, its first in Africa and sixth globally. Earlier this year, Microsoft, in partnership with G42, announced the launch of a billion-dollar digital ecosystem investment in Kenya which will include the creation of a green data center and an East Africa Innovation Lab, among other projects.

This rising trend is paving the way for more innovation from local players and providing Kenya with more visibility on the global stage. Kenya is fast becoming the place to be for enterprises with serious interests in Africa and its tech ecosystem can only benefit from this.

Watch out for the Silicon Savannah

Financial inclusion in Kenya stands at 83%, while internet penetration is around 87%. This is a testament to the innovative spirit of the East African nation and its commitment to digital and economic progress. This tremendous progress can also be the catalyst for more innovation and the foundation of a stronger tech ecosystem, especially if public sector support in the form of enabling regulations and government initiatives designed to foster innovation continues to grow.