Factors that make it difficult for Zimbabwean startups to obtain funding from international financial sources

Let’s delve into a pertinent inquiry – why do Zimbabwean startups find it difficult to attract equal amounts of funding compared to other African startups? Is this a balanced question for us to be asking? Let’s explore this further.

There are numerous elements at play that complicate the process for Zimbabwean startups in attaining funds from global investors.

While it might seem outlandish considering we highlighted Jamboo’s over $1m funding feat in a little over a month just last week. By the end of our conversation, it should be clear as to why Jamboo’s success is unique and why million-dollar deals are more frequently seen elsewhere in Africa.

Market Size

Zimbabwe’s relatively small market is an inescapable reality. Approximately 15 million people can be identified in this bucket, which may seem impressive until one notes that Cell C, South Africa’s fourth largest mobile network operator, boasts over 16 million subscribers.

Interestingly enough, Econet Wireless, the country’s largest operator, has a subscriber base that is significantly smaller than Cell C.

It’s crucial to remember that the potential market for most business concepts will be considerably less than 15 million. Starlink, for instance, a topic we’ve frequently debated, realistically targets less than 50,000 individuals given that its kit costs upwards of $600 and subscription rates approach $40.

These numbers aren’t exactly enticing for investors. Hypothetically, if Zimbabwe had a market size comparable to Nigeria’s, one could argue that Starlink would have found a way to breakthrough by now, regardless of any formidable obstacles.

Consequently, starting a business like a ride-hailing service in Bulawayo would obviously deal with very modest figures.

Bulawayo province is home to 666,000 inhabitants. If we hazard a generous guess that 10% of this populace would utilize a ride-hailing service, we’re examining a potential market of around 66,000 individuals. This figure hardly stirs up excitement amongst venture capitalists in Silicon Valley.

Poverty Levels

For the privileged few of us who are able to read this, it’s often difficult to fully comprehend the extent of poverty within our country.

While we may believe we’re facing challenges, it’s a punch to the gut when Zimstat, our government agency, reports 61% of Zimbabweans earn less than Z$100,000 a month (equivalent to approx. US$ 13 at the time). Outraged, we react, “It can’t possibly be that dire, can it?”

Sadly, the reality is indeed that bleak. Occasionally, when a startup stumbles upon a worthwhile problem to solve, their business model crumbles upon realizing that while the populace necessitates a solution, they can’t afford the requisite payment to justify the enterprise.

Discerning investors are cognizant of this harsh truth. We frequently hear from startups about how potential investors, initially excited about pitched projections, withdrew their interest after a quick Google search revealed Zimbabwe’s small and impoverished market.

Currency Issues

Our national currency’s instability poses another challenge. Inflation is often likened to taxation, as both diminish the public’s purchasing power.

The diminishing value of the Zimbabwe dollar is off-putting to potential investors. However, isn’t our economic system multi-currency?

Indeed, but in reality, as our mobile network operators could attest to, you may find yourself burdened with Z$ and eagerly appealing to the government for permission to convert it to USD.

Country’s Reputation

Our reputation as a challenging economic environment to operate in – plagued with high inflation, uncertain political climate, and substantial taxes – doesn’t aid our case.

The government’s method of surreptitiously enacting Statutory Instruments leaves the public with little time to anticipate and identify potential loopholes. This constant unpredictability hinders planning and has forced many businesses to close in wake of abrupt legal changes.

To add to the complexities, the issue of sanctions also persists. Even if they are targeted, the nation still loses potential investment as investors are wary of inadvertently partnering with companies that may have sanctioned directors operating in the shadows.

However, It’s not All Doom and Gloom

Despite the array of challenges, this doesn’t spell the end for startups seeking funding in Zimbabwe. It merely implies that the process is considerably tougher, necessitating Zimbabwean startups to deliver exceptional pitches.

They must strive to counter the prevailing bias and prove that despite the mentioned challenges, their business model is robust. Essentially, they have to present a significantly stronger case than many of their African peers.