For years, Kenya’s startup ecosystem has thrived on international aid, with USAID funding key initiatives that have propelled innovation and business growth. Programs like the Kenya Investment Mechanism, which mobilized private capital for SMEs, the USAID Afya Uzazi program, which supported health-tech innovations, and our own Women Entrepreneurship Incubator Program (WEIP) at @iBizAfrica, which helped women-led businesses scale, have all benefited from this support. But with the sudden suspension of USAID programs, these and hundreds of other initiatives have come to a halt, leaving entrepreneurs at a crossroads. Without this financial cushion, startups that once relied on grants to survive must now rethink their strategies. The question is no longer just about sustaining businesses—it is about whether Kenya’s entrepreneurs can innovate and grow in a landscape where donor support is no longer guaranteed.

The impact is swift and far-reaching. In the health sector, clinics relying on USAID grants to provide maternal care and HIV treatment are scaling back services, leaving vulnerable communities without access to critical healthcare. Agritech startups that depended on donor-funded programs to distribute climate-smart farming solutions are now struggling to maintain operations. In the education space, initiatives that provided digital learning tools to underserved schools have been forced to pause, disrupting students’ access to quality education. Across the board, over 130 projects have been suspended, putting thousands of jobs on the line. Organizations that once relied on USAID funding to expand operations now face the harsh reality of budget cuts, halted partnerships, and an uncertain future.

So, what now? Do businesses wait it out and hope the funding taps turn back on? Or is this the moment to step up, find new ways to stay afloat, and build something that is not tied to the next round of donor funding? It is a tough reality check, but maybe—just maybe—this could be the push Kenya’s entrepreneurs need to rethink how they grow and sustain their businesses.

For years, the conversation around self-reliance has felt more like an aspiration than an actual plan. But now, with the safety net gone, businesses have no choice but to adapt—and fast. The good news? Kenya’s entrepreneurial scene has never been short on resilience. Even before this funding freeze, some startups were already finding ways to thrive without donor support. Fintech companies like Get Payd have built entire business models around mobile money, proving that financial inclusion does not have to rely on aid. By serving a growing network of SMEs looking for faster, more flexible cash flow solutions, Get Payd has turned customer demand into sustainable growth. Agritech startups like Rhea Soil Health are forming direct partnerships with farmers and local cooperatives, reducing their dependence on donor-funded programs. Then, there is growing interest from private investors who see the potential in Kenya’s startup ecosystem—not just as a development project but as a real market opportunity.

This shift is a chance to build something stronger. But what does that look like in practice? Let us break it down:

1. What Are the Alternatives?

The first step is rethinking where the money comes from. While grants and donor funding have been a lifeline for many businesses, they are not the only option. Kenyan startups have already begun tapping into:

• Venture Capital & Angel Investors – Investors are looking for high-growth businesses with sustainable models. In 2024, Kenyan startups led Africa in VC funding, proving that there is capital available—just not in the usual places.
• Revenue-Based Financing – Instead of giving up equity, some businesses are leveraging future payments to fund their growth. Take M-KOPA, for example. By using a pay-as-you-go model, the company has expanded rapidly without heavily diluting equity. Customers make small, incremental payments for solar kits, smartphones, and other assets, generating a steady revenue stream that fuels further expansion. This approach proves that businesses can scale while maintaining control—without waiting for the next round of donor funding.
• Public-Private Partnerships (PPPs) – Government-backed initiatives are slowly stepping in to fill the gap. The Startup Bill, 2022 is a prime example of policy shifts designed to create a more supportive environment for entrepreneurs. Click here to read more about what the bill means for you as a Kenyan entrepreneur.
• Bootstrapping & Local Investment – Startups are increasingly turning to lean, self-sustaining models and seeking support from local investors who understand the market dynamics. Accelerators like Villgro Africa and Pangea Accelerator offer not only financial backing but also mentorship and advisory services to help startups grow. Additionally, platforms like Chumz assist entrepreneurs in building disciplined savings habits, enabling them to reinvest profits effectively.

2. Innovation Driven by Necessity

Every crisis forces creativity, and this one is no different. Without donor restrictions shaping business priorities, entrepreneurs now have the freedom to design solutions that actually fit local markets.

• Fintech is already proving this. Mobile money services like M-Pesa thrived without foreign aid, and now, new players such as Tala and Branch are emerging with innovative credit, savings, and lending solutions.
• Agritech is evolving. People are moving beyond donor-backed distribution models to form direct partnerships with farmers, using AI and IoT to create solutions tailored to local needs. A great example is @iLabAfrica’s IoT and Data Science team, who deployed mini-weather stations and the Imarika app in Busia County—giving smallholder farmers real-time data on soil conditions and weather patterns. Unlike donor-funded projects with rigid priorities, this initiative focuses on long-term sustainability, equipping farmers with the tools to adapt and thrive. Read more about the project here.
• Health-tech is stepping up. Aurora Health Systems, for example, designed a remote cardiac monitoring device for home use, but market demand has driven its adoption in clinics without advanced ECG equipment and even for fetal heart monitoring. This shift shows how businesses can adapt and scale based on real needs—without relying on donor funding.

The Bigger Picture

If there is one silver lining to this funding freeze, it is that it is forcing Kenya’s startup scene to mature. Instead of building businesses around donor funding cycles, founders now have to focus on long-term sustainability.

This is where the right support systems—incubators, accelerators, investors, and policymakers—become critical. At @iBizAfrica, we have seen firsthand how access to mentorship, training, and funding networks can make all the difference. We are doubling down on connecting startups with the resources they need to transition from aid-dependent to investment-ready.

So, what is the real takeaway? The loss of donor funding is not just a challenge but a turning point. It is time for entrepreneurs to rethink, reimagine, and rebuild a startup ecosystem that is truly self-sustaining.

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