| dc.description.abstract | Investment in startup businesses has been recognized as an important resource for
Economic growth and, therefore, economic development. However, most startup
businesses find that in order to grow and scale they need external financing as well as
advice. The main sources of funding for businesses in Sub-Saharan Africa as
personal/family loans followed by private equity, bank debt, government funding,
venture capital, angel and seed funding and other sources respectively (Omidyar Network
and Monitor Group 2012). The objective of this study was to establish the
impact of investment by angel investor on technology startups in Kenya. The study
was done using primary data from technology startup owners who have received
investment from angel investors from 2012 to 2014.
The study had convertible debt, equity and a mixture of debt and equity as the
dependent variable and increased chance of startup survival, higher chances of getting
secondary financing, faster scalability for the business, access to secondary markets,
rapid prototyping and go to market strategies, better structures within the business,
better financing terms compared to local commercial banks as the independent
variables. The results show that 30% of startups received debt investment and 15%
received equity investment. This reveals that for most early stage businesses most
investors were not confident about the revenue forcasts and so they preferred to give
debt since they can get security for their financing. The other startups had either
personal financing or grants.
From the study it is clear that there is an emergence of new sources of financing from
angel investors. This investment is meeting the challenges that startup founders face
mainly in form of financing and improving the skills of the entrepreneurs and their
teams. The motivation for the angel investors is mainly social impact and high returns
if the business thrives. It is clear that tech startup with angel investment will continue
to lead in the technology field by having higher chances of survival, growth rate, job
creation and higher revenues compared to startups that do not have angel investment.
As more young and innovative individuals begin their entrepreneurial journeys there
will be stiffer competition for the limited opportunities to get funding, This will
influence the quality of innovations, the number of filed patents and the overall
impact of ICT to the economy of Kenya. | en_US |
