Earlier this month, a high-profile delegation of 12 Japanese investors visited Ethiopia. Led by Yasuhiro Yoshizawa of Inclusion Japan (ICJ), the group comprised representatives from established corporations like Panasonic, Toyota, Nissay, and Ikemori Venture Support.
Some of the delegates had already invested in Ethiopia, while others were exploring opportunities. Their visit coincides with the official launch of Dodai, an electric motorcycle assembly and sales company. During their stay, the delegates also met with representatives from the Ethiopian Investment Commission and heard pitches from eight local startups.
Despite being Africa’s second-most populous nation, Ethiopia’s startup ecosystem lags behind those of Kenya, South Africa, Egypt, and Nigeria in terms of securing funding and attracting venture capital from both local and international investors.
There is a lack of representative and properly organized data about the funding landscape in Ethiopia. However, according to Briter Bridges, between 2015 and 2022, Ethiopian startups raised $14 million. An upcoming report by Shega finds that this funding flow could be 3 to 5 times higher.
Nevertheless, this amount still falls short compared to Kenya, which raised $1.28 billion, Nigeria with $2.07 billion, Egypt with $800 million, and South Africa with $993 million during the same period (2015-2022)
But a shift is underway. Recent times have seen a growing interest from Japanese investors in the Ethiopian startup ecosystem.
Ethiopian startups have secured $9 million in funding over the past two years from Japanese venture capital firms (VCs). This influx of capital from one single source outpaces the investment currently flowing into Ethiopia’s startup ecosystem from other venture capital streams.
The genesis of this development can be traced back to the arrival of Yuma Sasaki, a Japanese entrepreneur and Founder & CEO of Dodai. Founded in 2022, Dodai recently raised 4 million dollars in its Series A round, which is one of the highest investments raised by startups in Ethiopia.
Inclusion Japan, a Tokyo-based VC firm, is among the investors backing Dodai, having invested three million dollars to date. According to ICJ director and co-founder Yasuhiro Yoshizawa, who has been to Ethiopia six times in the last two years, Ethiopia’s young and rapidly growing population, coupled with its growing GDP (ranking among Africa’s top 5), presents a promising market.
“Our investment in Dodai, which is building a strong team and board, demonstrates the potential for growth in Ethiopia’s startup landscape,” said Yasuhiro.
Leveraging this momentum, ICJ has injected an additional three million dollars into Addis Software, a software development firm; Gebeya, a SaaS-enabled talent cloud solution provider; and GoodayOn, a digital gig marketplace.
Yasuhiro also told Shega that ICJ intends to invest another 10 million dollars over the next year in Ethiopian startups.
“I am confident that our forthcoming investments should target the fintech sector,” stated Yasuhiro.
Nissay Capital, the corporate venture capital arm of Nissay, a $500 billion asset insurance and management firm, is another investor eyeing Ethiopia. The firm made its first investment in Africa on Dodai.
According to Kosuke Ueda, a representative of Nissay, the company is exploring opportunities to diversify its portfolio. Nissay has a huge global presence but has very limited exposure to Ethiopia and the African business landscape in general.
“So, we are seriously looking for investment opportunities in Africa,” said Kosuke.
Nissay heard about Dodai last summer and sent its teams to see the work it is doing in Ethiopia and assess the market. This evaluation led to a one-million-dollar investment in Dodai. While this represents a modest portion of Nissay’s total portfolio, the representative indicated their intention to expand their investment footprint in Ethiopia.
This initial investment by Nissay subsequently attracted another Japanese venture capital firm to Ethiopia.
“A year ago, I didn’t know anything, but then I found out about Nissay investing in Dodai, and I was like, there must be some interesting firms in Ethiopia. And now I am here for the first time and I got to explore the business landscape, which inspired a very strong interest,” reflected Takaaki Nishino, Managing Director at Ikemori Venture Support.
According to Takaaki, unlike most Japanese VC firms, Ikemori has more exposure in Africa and is a major investor in Degas, a Ghana-based Agri-fintech startup. Ikemori has globally invested in 30 companies so far.
Takaaki told Shega that Ikemori is looking at both the micro and macroeconomic perspectives of Ethiopia and will make their first investment in the country in the next few weeks or months. Their primary focus appears to center on e-mobility and green energy initiatives.
The Yuma link
Yuma serves as a crucial bridge for Japanese investment in Ethiopian startups. According to Yasuhiro of ICJ, Yuma’s expertise and connections make him an invaluable point of contact.
Yasuhiro states that the Dodai founder is a trusted figure among Japanese investors. Consequently, when Yuma transitioned his focus to the Ethiopian market, his insights into its potential resonated strongly.
Yuma, who graduated from the University of Tokyo, has several years of experience working with startups in both Africa and Japan. He also led a commercial team at Uber and successfully launched an e-scooter-sharing service in Japan.
Addis Alemayehou, chairman of Kazana Group and one of the biggest advocates of Ethiopian startups, met Yuma when he set foot in Ethiopia for the first time in 2022 after they exchanged some DMs on LinkedIn. They talked about opportunities and the startup ecosystem before Addis helped Yuma navigate the nation’s business landscape to launch Dodai.
According to Addis, trust typically develops rapidly when there is a local presence or a familiar connection operating in a different region. “I believe Yuma fulfilled that role when he arrived here and launched Dodai, bridging the gap by serving as a local reference point for Japanese investors.”
Government Aid & Corporate Investment
The interest from Japan is not only coming from one source. Earlier this month, five Ethiopian investment firms came together to establish the Madeg Partnership, which aims to source investment opportunities on behalf of a Japanese VC.
The initiative opens the door for around five startups to each secure at least $150,000 in funding.
The Japan International Cooperation Agency (JICA), a government institution, through its Next Innovation with Japan (NINJA) program, has also been collaborating with the Ministry of Innovation & Technology (MinT) on various projects aimed at supporting Ethiopian entrepreneurs.
JICA sponsors local startups to participate in international and local summits like GITEX, a global tech show, organized by the Dubai World Trade Center, facilitating valuable networking opportunities. Additionally, they have organized an acceleration program and pitch competition, where the winners were granted a chance to travel to Japan for a delegation program and received equity-free funding.
Furthermore, last year JICA in collaboration with MinT released the Addis Ababa Startup Ecosystem Report, providing readers with a deep dive into the capital’s startup landscape.
The research, which is the first of its kind in terms of depth and reach, surveyed over 300 startups in Addis Ababa, finding key insights into the state of funding, revenue, valuation, and job creation of the startups.
The global trading conglomerate Sumitomo Corporation also owns a minority stake in Safaricom Ethiopia and has stated it will be scaling its engagement in the country.
“Japan is a leading country facing complex societal challenges like depopulation and aging, which is the opposite of Ethiopia’s situation,” said Hiroshi Saijo, Head of Business Development and Strategy at Panasonic Venture Group, the corporate venture capital arm of Panasonic.
“This is why Panasonic believes it’s important to explore new approaches in areas like sustainability, environment, and emerging technologies,” said Hiroshi. “We haven’t invested in Ethiopia yet, but we’re eager to make an investment that benefits the next generation and has a long-lasting impact on the country.”
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In our initial report, we erroneously stated that Ethiopian startups had raised 11 million dollars from Japanese investors. However, the correct amount raised was nine million dollars, and we have rectified this error upon becoming aware of it.
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