If you ask any Kenyan founder, they will tell you that achieving unicorn status is equivalent to striking gold. It represents the pinnacle of success, a milestone that only seven startups in Africa have achieved. Kenya, despite being one of the four largest tech ecosystems in Africa, has no homegrown unicorns. A successful Kenyan startup could potentially expand rapidly across the East African region, significantly increasing its market size and chances of becoming a unicorn. But has this happened? What setbacks might Africa’s Silicon Savannah be facing, considering that many startups generally have unicorn ambitions?

There is a general thesis that Kenyan startups are not “ambitious” enough to solve the continent’s most complex issues. The Global Startup Ecosystem Index Report declared that Kenya has not produced unicorns because its startups have yet to explore regional and international markets. StartupBlink, in a separate report, agreed: “Kenya will not be able to create a critical mass of unicorns from within its local market.”

Five industry experts who spoke to me cite several reasons Kenya hasn’t had a unicorn, including the one that says the country is a small market. “A unicorn from these lands would need to be a continental or global business, solving a larger-scale problem,” one angel investor told me.

The argument that Kenya’s market is too small to nurture a unicorn is debatable. For instance, in 2023, Kenya replaced Nigeria, which has produced four unicorns (Opay, Jumia, Flutterwave and Interswitch), as Africa’s top startup funding destination. In that year, Kenyan startups raised about $800 million, surpassing Nigeria, which dropped to fourth place after leading in 2021 and 2022, per The Big Deal.

A business’s profitability often depends on unit economics, not just market size. A high-margin business model can generate significant revenue even in a smaller market. A startup can become a unicorn by dominating a specific niche, regardless of overall market size. There are many examples of this globally: OpenAI popularised AI chatbots and Israel’s Wiz found a niche in cloud security. Granted, these are big companies backed by the world’s top venture capital firms, but I don’t think niche domination will happen soon in Kenya anyway.

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This is because fintech startups—the only ones often projected to become unicorns—in the Kenyan market are yet to crack a new market that Safaricom’s M-PESA hasn’t already dominated. Utility payments? M-PESA has that. Global payments? M-PESA has this covered. How do you truly innovate around these products, considering M-PESA already leads the fintech space?

“If you look at it, most unicorns are fintechs. But M-PESA already dominates in Kenya,” the expert told TechCabal. “So, it’s hard for a fintech to claim that unicorn status, especially now that valuations are more conservative.”

The aforementioned Startup Ecosystem Index Report once projected that startups like M-KOPA, a digital credit company; and Wasoko, a B2B e-commerce platform, stood a chance of becoming unicorns.

This projection was made in 2022. Since then, Wasoko has exited Zanzibar, Uganda and Zambia to “focus on the momentum we’ve built in our more mature markets”. Its valuation has also shrunk to $260 million as of December 2023, with former employees saying that its “losses were quite high”.

M-KOPA raised $250 million in 2023, but it hasn’t reached that valuation yet. Its last valuation was $330 million in May 2023.

Despite their potential, Kenyan startups have yet to fully overcome the complex hurdles specific to the Kenyan market, hindering their path to unicorn status.

While hoping that fintech could be the unicorn pathway for Kenya’s tech ecosystem, it’s essential to consider other sectors. Kenya might have unique problems to solve in alternative areas like agriculture and healthcare. Maybe these are where the Silicon Savannah unicorns will emerge from.

Kenn Abuya

Senior Reporter, TechCabal.

Feel free to email kenn[at]bigcabal.com, with your thoughts about this edition of NextWave. Or just click reply to share your thoughts and feedback.