Quick Read: USAID under President Trump has cut off $100 million in funding for Kenyan startups, affecting key sectors like healthcare, agriculture, and clean energy. Over 30 startups, including Pula Advisors, BasiGo, and Maisha Meds, relied on USAID grants to scale their operations. The directive also threatens funding from the International Development Finance Corporation (DFC), putting further strain on Africa’s startup ecosystem.
The recent executive order by President Trump to shut down USAID has sent shockwaves across global development initiatives. The move has halted essential aid to vulnerable populations and cut off a crucial source of non-dilutive funding for African startups.
Impact on Kenyan Startups
For over a decade, USAID’s Development Innovation Ventures (DIV) program invested more than $100 million in Kenyan startups. These funds have supported groundbreaking innovations in healthcare, agriculture, and clean energy. However, with the sudden shutdown, many promising ventures now face an uncertain future.
A Vital Source of Funding Lost
The DIV program has been instrumental in supporting over 30 Kenyan startups. It provided grants ranging from $500,000 to $6 million, enabling entrepreneurs to scale operations and prove the viability of their ideas.
For instance, Pula Advisors, a Kenyan insure-tech startup, secured a $1.5 million USAID grant in 2023 to expand insurance coverage for smallholder farmers in Kenya and Zambia. Without such funding, many startups may struggle to sustain and grow their businesses.
The US Directive That Changed Everything
On January 24, the US State Department issued a directive to halt all aid, effectively ending grants that many African founders relied on. This is particularly concerning for the Kenyan startup ecosystem, which has historically depended on foreign development funding to fuel innovation.
The Role of USAID in ‘Silicon Savannah’
Kenya, often dubbed Africa’s ‘Silicon Savannah,’ is one of the continent’s leading startup hubs. In 2024 alone, the country attracted around $638 million in venture capital funding. However, support from development agencies like USAID has been an equally crucial—yet often overlooked—component of startup success.
Startups Affected by the Shutdown
Several high-impact startups have benefited from USAID grants, including:
- BasiGo – Received $1.5 million to expand its electric bus services to Rwanda.
- Maisha Meds – Secured $5.25 million to enhance its medical supply distribution platform.
- SolarGen Technologies – Granted $2.5 million to develop solar-powered water purification systems.
With USAID funding eliminated, many startups will now have to look for alternative sources of capital, which may not be as accessible or favorable.
A Broader Threat: DFC Funding at Risk
Beyond USAID, another looming concern is the potential shutdown of the International Development Finance Corporation (DFC). The DFC has been another key player in financing African startups through grants and loans.
- Ilara Health – Received a $1 million loan from DFC in January to improve its diagnostic platform.
- M-KOPA and Twiga Foods – Benefited from DFC debt financing to scale operations.
If the DFC follows USAID’s path, the financial gap for African startups will widen further, posing significant challenges to their sustainability.
The Shift in African Startup Investment
The USAID shutdown comes at a time when Africa’s startup ecosystem is undergoing a shift. In 2024, venture capital investment moved away from traditional sectors like e-commerce and fintech towards climate tech—a growing area of interest for impact investors.
However, the Trump administration’s stance on climate change and environmental conservation raises concerns about future funding for this sector. Without support from organizations like USAID, the momentum gained in climate tech innovation may stall, putting Africa’s green economy at risk.
What’s Next for Kenyan Startups?
As the Kenyan startup ecosystem navigates this funding crisis, entrepreneurs and investors will need to explore alternative financing options. Crowdfunding, local venture capital, and impact investment funds may become even more critical in filling the gap left by USAID and potentially the DFC.
The loss of USAID funding is a significant blow, but Kenya’s resilient and innovative startup community may yet find ways to adapt and thrive in this new landscape.
