Determinants of investment in the informal venture capital market in Kenya
Date
2013
Authors
Nyambura, Melissa M
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
The objective of this study was to investigate the determinants of investment in the
informal venture capital market in Kenya. Thus the study sought to determine the
factors that contribute most significantly to the decisions by business angel investors
to invest in small businesses in Kenya. In addition, the study examined the profile of
the business angel investors and the relationship between the determinants and the
investors’ decision to invest. The study was predominantly exploratory and
employed the use of the questionnaire as the main research tool for the primary
respondents and structured interviews for some of the target respondents. The target
of the study was business angels also called angel investors, who had actually
invested in businesses in Kenya or were prospective investors in Kenyan businesses.
The business angels were identified through various methods in an attempt to
survey as many respondents as possible. Besides the questionnaire respondents, the
study also interviewed respondents in the financial services, SME sectors as well as
public institutions that would provide further insights about the environment for
business angel investing in Kenya. The results obtained from the study support
much of the literature reviewed on the factors that business angels consider as they
make investment decisions, the typical profiles of investors and public sector
interventions that support the environment for business angel financing. One of the
factors identified as statistically significant with the decision of business angels to
invest in businesses is return on investment. The results obtained from the study
also point to the need for entrepreneurs to be aware of different profiles of investors
so they can approach those who are better matched with them. It is also important
for entrepreneurs to be aware of the factors that business angels consider as they
make their investment decisions. Finally, several recommendations are made on
possible interventions that might be considered at policy and macro level to support
the growth of business angel investing in the country. Key among this is capacity
building of the entrepreneurs in terms of developing their skills for good business
management as well as capacity building of the business angels specifically around
training the investors on the investment process. Stakeholders interviewed suggested
government might be the ideal partner to support the capacity building component
until the angel financing initiative can survive on its own.
Description
Submitted in partial fulfillment of the requirements for the Degree of Master of Business Administration (MBA)
Keywords
Informal Venture, Capital Market, Kenya