Safaricom mulls venture firms in acquisitions drive

Thursday July 06 2023

A pedestrian walking past Safaricom Shop along Kenyatta Avenue in Nairobi on May 7, 2023. PHOTO | EVAHS HABIL | NMG


Safaricom plans to set up two venture capital firms as it positions itself to buy into promising tech start-ups to fuel its growth into the future.

The telco has asked its shareholders to approve the establishment of the two firms during its annual general meeting on July 28, 2023.

This will allow it to buy into seed-stage and growth-stage startups, at a time when a funding drought has seen dozens of startups close up in Kenya.

Read: Agriculture, health startups lag behind in seed capital

“The board proposes that) the incorporation of a company limited by guarantee to invest in seed stage startups to support the development and growth of technology entrepreneurs and build reputation and trust within the tech community in Kenya be approved,” the notice signed by company secretary Kathryne Maundu reads in part.

“The incorporation of a private limited company (or the repurposing of an existing subsidiary) to invest in growth-stage startups (scale-ups) and initiatives that enable achievement of Safaricom PLC’s strategic mission for a financial return (profit) be approved.”


Operational shift

The incorporation of the two special-purpose companies will mark an operational shift from the already running ‘Spark Fund’ grant that Safaricom unveiled in 2015 to boost the growth of seed-stage startups in the country.

The fund, which has been run by an unincorporated trust named Zindua since inception, has seen the telco pump at least $1.5 million (Ksh211.2 million) without receiving back commensurate tangible value.

The firm says the proposed company to take over the scheme will be a wholly owned subsidiary of Safaricom and that it will help strengthen administrative and governance processes.

The other limited liability company pitched for incorporation will train sights in growth-stage tech startups for a financial return to the telco.

Read: African startups beat the odds to attract $3.5b funds

“We are proposing the setup of a limited liability company for investing in growth stage startups and initiatives that are strategically aligned with our mission for a financial return,” says the telco.

“The intention is that any gains from the portfolio of investments will be capitalised back to Safaricom PLC.”

If successful, the enormous financial muscle and expansive networks of the telco will come in handy to enable it to grow its scope and reap big from innovative ideas that would otherwise have never seen the light of day owing to funding limitations of the small-time founders.

The Kenyan start-up ecosystem is recognised as among the most progressive ones in Africa, coming third place only after South Africa’s and Nigeria’s in the global start-up ecosystem index, owing to its vibrancy in churning out far-reaching innovations.

Read: Kenya and Uganda start-ups long-listed for Africa Tech Awards

Kenya has, however, witnessed a concern-raising trend in recent months where promising tech startups have been on a shutting spree, a majority of them citing funding drought.