Venture Capital Financing and the Performance of Startups in Kenya: A Case Study of Nairobi City County

Abstract

In developed countries, venture capital is essential for promoting economic growth and startup expansion. However, despite the availability of venture capital since the 1970s, Kenya's industrialization has remained sluggish because of financial limitations that impede the expansion of startups. This study looked at how venture capital funding affected the performance of Kenyan entrepreneurs in Nairobi City County. In particular, it examined the impact of cost, technical assistance, venture capital management techniques, and the regulatory framework's moderating function on startup performance. Using structured questionnaires, quantitative data was gathered from 86 sampled startups out of 110 registered VC-funded enterprises using a cross-sectional research design, yielding a 91.8% response rate. STATA software was used to analyse the data. The results showed that while the legal framework had a favourable moderating influence on this relationship, venture capital management practices, technical support, and cost all had a substantial impact on startup performance. While high venture capital expenses had a negative effect on profitability, startups that favoured convertible notes and equity funding performed better. According to the study's findings, venture money significantly improves startup performance when combined with efficient management techniques, technical assistance, and a favourable legal framework. It advises companies to improve their financial planning, take advantage of venture investors' technical support, and push for legislative changes that improve the regulatory climate for expansion.