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Ethiopian media, data, and intelligence firm Shega in partnership with the Japan International Cooperation Agency (JICA) and Ministry of Innovation & Technology (MInT) has released the Addis Ababa Startup Ecosystem Report 2023, providing readers with a deep dive into the capitals’ 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. 

“This report marks the first time that a study has been conducted solely on the startup ecosystem in Addis Ababa. Previously, numerous studies were dedicated to the Micro-, Small and Medium-sized Enterprises (MSMEs) sector. However, this research establishes a new standard as it seeks to identify the innovative and disruptive businesses in Addis Ababa based on internationally accepted startup definitions,” said Michael Thomas, co-author of the report and Associate Consultant at Shega.

In addition to mapping the startups based on sector the 160-page report encompasses an analysis of the activities of various stakeholders in the startup ecosystem in Addis Ababa, including government offices, business support organizations, investors, and financial ecosystem players.

“We have also examined the challenges startups face, and what makes these startups attractive to foreign investors,” added Michael.

One of the key findings of the research is that most startups in Addis Ababa are in their early stages of business, with only 23% being post-early stage. Almost half of the startups (48%) found it very difficult to obtain capital.

In terms of job creation, 47% of startups said they employed 1-4 people, while 25% said they employed 5–9 people. Only 15% of them reported having more than 15 employees.

The survey also found that 59% of the startups surveyed had not undergone any valuation process. This means that these startups do not have a clear understanding of their potential value and growth, which can be a disadvantage when it comes to fundraising or being acquired by another company. 

According to Michael, one of the limitations of the report is that it failed to map the fintech sector.

“We only received a few replies from finecth startups in our survey. Building a conclusion on that would not be a representative of the reality. Thus, we were forced to exclude the sector from the survey,” said Michael.

However, the report brings several other sectors into the picture, including Agritech, ecommerce, transportation and logistics.

From the sectors that were reviewed, transportation and logistics sector stands out, boasting the highest number of post-early-stage startups, with the highest employment levels, annual revenues, and investment rounds compared to other sectors.

Furthermore, the report identified 85 different support ecosystem players, 10 development partners, 15 local and international investors and around a dozen different financial service providers engaged in the Addis Ababa startup ecosystem.

“We still believe there are some gaps in the report. We believe future research conducted in the area will address them and will lead to more understanding of the sector,” added Michael.

JICA, through its Next Innovation with Japan (NINJA) program, has been collaborating with MInT on various projects aimed at supporting Ethiopian entrepreneurs. JICA sponsors local startups to participate in international and local summits like GITEX, 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.

“We view entrepreneurs as important partners in development, and under the NINJA project, we will support their growth and promote cooperation with Japanese companies,” Hara Sachiko Startup Ecosystem Advisor at JICA stated in the report. 

You can download the report by clicking here.

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Kaleab Girma, an Addis Ababa-based reporter and researcher, with over six years of experience in the field. He currently serves as Shega's Editor-in-Chief and specializes in reporting on small businesses, innovation, technology, and startups in Ethiopia.