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Funding gap for non-fintech startups under scrutiny
Despite providing innovative solutions to some of the country’s most pressing challenges, non-fintech startups still struggle to secure investment. PHOTO | COURTESY
What you need to know:
- While fintech continues to grow rapidly, sectors like agritech and health tech face significant barriers to growth.
- These include a lack of understanding from stakeholders, regulatory hurdles, and limited investor confidence in their long-term potential.
Dar es Salaam. In Tanzania’s rapidly growing startup ecosystem, fintech has emerged as the standout sector, outpacing all others in attracting investment.
In 2024, the country raised $53 million in startup funding, with a staggering 75 percent of that amount going to fintech companies, notably, Nala alone secured $40 million.
This trend is in line with broader patterns across Africa, where fintech has captured nearly half of the $2.2 billion raised across the continent.
The challenge now is shifting focus to create an environment that allows other sectors—such as agritech, health tech, and renewable energy—to access similar funding levels.
The overwhelming success of fintech in Tanzania has created a highly imbalanced startup ecosystem, where funding is disproportionately channelled into one sector, leaving other industries underfunded.
Despite providing innovative solutions to some of the country’s most pressing challenges, non-fintech startups still struggle to secure investment.
While fintech continues to grow rapidly, sectors like agritech and health tech face significant barriers to growth.
These include a lack of understanding from stakeholders, regulatory hurdles, and limited investor confidence in their long-term potential.
The e-health startup Dawa Mkononi CEO and co-founder, Mr Joseph Paul, told The Citizen that his company was facing several challenges despite being fully digital.
He said the business was initially treated like a traditional pharmacy, with limited support from wholesalers and resistance to its e-commerce model.
“We had to constantly justify our model to people who didn’t fully understand e-commerce,” he explained, pointing to the difficulties that startups in sectors outside fintech encounter.
Mr Paul added that similar challenges extend to agritech, a critical sector in Tanzania, where agriculture remains the backbone of the economy.
Innovations that could improve food distribution, increase mechanisation, or offer better market access struggle to attract the necessary funding to scale.
Health tech startups face a similar issue, with companies aiming to revolutionise healthcare services fighting for attention and resources.
“These sectors lack the investor confidence and quick returns that fintech promises,” Paul said.
Tembo Plus founder Victor Joseph attributes the problem to investor preferences.
He revealed that venture capitalists are drawn to fintech for its proven profitability, scalability, and rapid growth potential.
“Fintech offers a clear and fast return on investment. Investors are hesitant to fund sectors like agritech or health tech, which they see as requiring more patience and long-term commitment,” he said.
This focus on quick returns has skewed the startup ecosystem, leaving sectors with transformative potential struggling to thrive.
The lack of visibility for startups in non-fintech sectors further exacerbates the problem.
Plate AI co-founder, Janeth Kareen Kilonzo, explained the challenges her company faced in attracting investor attention.
“Fintech has global success stories that attract investors. But in sectors like ours, we lack platforms to present our impact and potential,” said the co-founder of a company that helps individuals with non-communicable diseases manage their diets.
