Kenya is developing a new approach to address its startup funding challenges by tapping into corporate Social Responsibility budgets from major companies. The initiative draws inspiration from successful models already operating in India.
The Kenya National Innovation Agency (KeNIA) has started working on a proposal that would create a framework allowing the government to direct a portion of corporate CSR spending toward a national innovation fund. This strategic move aims to provide more stable funding for the country’s struggling startup ecosystem.
Tonny Omwansa, who leads KeNIA as Chief Executive, explained that the agency wants to establish a system where large corporations contribute part of their CSR budgets to support local innovators and entrepreneurs. The concept mirrors India’s proven framework that has successfully channeled corporate funds into national development programs.
India’s approach requires qualifying companies to allocate specific amounts to CSR activities. Under the Companies Act 2013, firms with annual turnover exceeding 10 billion Indian rupees (approximately Sh14.57 billion) and profits of at least 50 million rupees (around Sh72.85 million) must spend a minimum of two percent of their net profit over three years on CSR initiatives.
Addressing the Valley of Death
Kenya’s startup ecosystem faces persistent challenges with unpredictable funding cycles. Most innovators struggle to secure financing beyond the early stages, a critical period known as the “valley of death” in innovation circles. Current funding often depends on donor support or government allocations, creating uncertainty for entrepreneurs.
Dr Omwansa noted that while Kenyan corporations already invest significantly in CSR projects, these funds typically support initiatives aligned with company interests rather than broader national development goals. The proposed model would redirect some of these resources toward more inclusive programs.
“The avenue we are beginning to explore is how to engage with the private sector in the CSR framework to get a percentage of the resources, so that then we bring it to the table and design programmes that benefit even the most marginalised,” Dr Omwansa stated.
He added that this approach would distribute resources more widely to beneficiaries who might never access funding if corporations continued managing CSR programs independently.
Building on Government Commitments
The CSR initiative complements existing government commitments to boost Kenya startup funding. President William Ruto announced a Sh1.5 billion seed fund during the annual innovation week in November 2024. This allocation includes Sh1 billion designated for startup support and Sh500 million for KeNIA operations.
KeNIA aims to multiply this government investment through private sector engagement. The agency plans to demonstrate how it can build startup pipelines that corporations can access, potentially attracting additional private funding.
“We plan to raise three times as much from the private sector by showing them we are building startup pipelines they can tap into,” Dr Omwansa explained. “If we succeed in mobilising another Sh4.5 billion on top of the government allocation, that will significantly scale our capacity.”
Tackling Innovation Underfunding
Kenya has faced criticism for inadequate innovation funding, with many university laboratories developing promising prototypes that never reach commercial markets. The lack of early-stage financing has been identified as the primary barrier preventing inventions from progressing beyond the prototype phase.
The proposed CSR model represents a potential solution to this persistent problem. By creating a more reliable funding stream, KeNIA hopes to bridge the gap between innovation and commercialization that has long hampered Kenya’s entrepreneurial ecosystem.
While the proposal remains in draft form, KeNIA expects it could trigger significant policy changes. The agency believes this approach will ensure CSR resources contribute more effectively to building a sustainable national innovation pipeline.
The initiative reflects Kenya’s determination to create more robust support systems for its startup community. By learning from India’s experience and adapting successful international models, the country aims to transform how it funds and supports local innovation.
