Effect of venture capital financing on the growth of technology driven startup firms in Nairobi County

Abstract

In the past decade, Kenya has seen an immense upward trajectory in entrepreneurial ventures. Coupled to this, there has been a fast-paced increase in the population of Technology driven enterprises inside the last decade. These start-ups are pivotal in economic development creating not only monetary reserves but also opportunity to network and diversify. Research activities on Venture Capital is on the rise but not to a good threshold to expose its full potential in emerging nations such as Kenya. This research aims to determine the influence of venture capital on the growth of Technology-driven startup firms in Kenya’s capital, Nairobi. The study critically examined how capital investment, monitoring and control, mentoring and professional expertise influence the growth of Technology-driven startup firms. The research-study was anchored on the agency theory, financial contracting theory, control theory and pecking order theory. From a recent study about are 800 firms that operate as Startups in Nairobi (AngelList, 2018). From these 148 are technology driven from which a sample was be drawn. A precession level of 10% was utilized, resulting to a sample (n) of 108 firms with research data being collected using structured research questionnaire. A total of 108 managers was drawn from each firm and comprised the main sample size. Quantitative research was done and data collected using a structured research questionnaire. A drop and pick method were adopted with the pilot test conducted among 10 percent of the sample population. The research obtained an 87 percent response rate was attained for the analysis. The results indicate that 33 percent of the startups were technology firms while 23 percent were in financial-technology. The study found out that 47.5 percent variations in the growth of Technologydriven startups in Kenya can be attributed to Venture Capitalists. The study concludes that improved venture capital financing improves the growth of startups. Further, the study concludes that monitoring and control improve decision making, improved entrepreneurial awareness, personnel management and business development positively influences startup growth. The study recommends that startup firms should strive to constantly revitalize their business structures for long term sustainable growth.