The decision to cease USAID operations has had a significant impact on various African startups that were benefitting from the agency’s support. For instance, the Development Innovation Ventures (DIV) program, which provided substantial funding to Kenyan startups, has been halted. This has resulted in a loss of opportunities for many promising ventures in sectors such as healthcare, agriculture, and clean energy.
Over 30 Kenyan startups relied on USAID grants to scale their operations and validate their business concepts. These grants, ranging from $500,000 to $6 million, were crucial for startups like Pula Advisors, which used a $1.5 million grant to expand its insurance services to smallholder farmers.
The sudden halt in aid from the US State Department could have severe repercussions for founders in Kenya’s startup ecosystem, particularly those who struggle to secure venture capital. Kenya, known as Africa’s ‘Silicon Savannah,’ has seen substantial growth in its startup scene, with millions in venture capital funding secured in recent years.
The shutdown of USAID funding not only affects individual startups like BasiGo, Maisha Meds, and SolarGen Technologies but also raises concerns about the potential closure of the International Development Finance Corporation (DFC). Many African startups, including Ilara Health, M-KOPA, and Twiga Foods, have benefited from DFC loans and grants.
As the African startup ecosystem evolves, there is a shift towards climate tech, attracting interest from impact investors. However, the current US administration’s stance on climate change may hinder the progress of climate tech startups and jeopardize the growth of this sector.