UnlockING Domestic Capital

Understanding the Domestic Capital Flywheel

The experience unlocking domestic capital for early stage ventures in Tanzania

Domestic Capital Doesn’t Move When You Ask It To

Reflections from Building Early-Stage Investment Ecosystems in Tanzania

A system-level model showing how domestic capital activates through coordination, not capital supply.

For years, the question I heard most often in emerging startup ecosystems was deceptively simple: “Where is the capital?”

Founders asked it. Donors asked it. Governments asked it. And often, the implication was the same — that capital was absent, hiding, or unwilling.

But after two decades working across African startup ecosystems — and especially through sustained engagement in Tanzania — I’ve come to believe that this question is usually the wrong one.

Capital is rarely absent. More often, it is inactive.

When Activity Doesn’t Translate into Investment

By the time the Serengeti Business Angel Network (SBAN) began its early work, Tanzania’s startup ecosystem was already visibly busy. Innovation hubs were operating in Dar es Salaam. Accelerator programs were graduating cohorts. Demo days were well attended. Pitch decks circulated widely.

Yet despite this activity, early-stage investment remained stubbornly thin.

Founders cycled through programs without closing rounds. Potential investors showed up to events but stopped short of writing checks. Deals were discussed repeatedly but rarely concluded.

From the outside, it looked like a capital shortage. From the inside, it felt more like collective hesitation.

What Hesitation Actually Looks Like

Early conversations with prospective angel investors were revealing. Many were successful professionals — business owners, executives, family office principals — clearly capable of investing financially. Yet when discussions turned to actual deals, uncertainty dominated.

• How do you value a company with no profits?

• What happens if the founder fails?

• How involved are you expected to be after investing?

• What does “governance” even mean at this stage?

These weren’t naïve questions. They were rational responses to an asset class with no shared reference points, no widely understood rules, and no visible peer behavior.

At the same time, founders often struggled to communicate their businesses in ways that investors could engage with. Financial models were optimistic rather than analytical. Ownership structures were informal. Reporting expectations were unclear. Again, not because founders lacked intelligence or ambition, but because the ecosystem itself had not yet agreed on what “investable” looked like.

What became clear very quickly was this:

capital wasn’t waiting to be deployed — it was waiting to be understood.

Why the First Check Is the Hardest

Even as understanding improved, something else held people back: risk concentration.

For first-time angels, investing alone felt dangerous — not just financially, but reputationally. Several potential investors openly said they would prefer to “see how a few deals go” before participating. Of course, if everyone waits, nothing happens.

The first real shift came when investment was reframed as a shared act. Smaller ticket sizes. Collective due diligence. Group discussions that surfaced doubts rather than hiding them. Syndication didn’t eliminate risk — but it made it socially manageable.

The first checks written through SBAN were modest. But they mattered because they converted abstract interest into lived experience. Once people invested once, the conversation changed. Fear gave way to curiosity. Questions became more specific. Confidence — slowly — began to build.

Community Before Capital

Something else happened along the way, less visible but equally important.

As the same people met repeatedly — investors, founders, intermediaries — relationships formed. Investors began to recognize each other’s perspectives. Founders adjusted their pitches based on prior feedback. Accelerators learned which gaps consistently stalled deals.

In an environment without long track records, familiarity became a proxy for trust.

Capital followed these relationships. Not because deals suddenly became perfect, but because uncertainty became shared. Investing stopped feeling like an individual leap and started feeling like a collective experiment.

This dynamic extended beyond angels. Corporates, development partners, and regulators increasingly interacted in overlapping forums. Signals circulated. Legitimacy accumulated. The ecosystem became more legible to itself.

When Deals Reveal the System’s Weaknesses

Ironically, it was only once capital began to move that deeper structural problems became obvious.

Angels repeatedly found themselves fixing issues upstream: rebuilding financial models, clarifying governance, resolving basic misunderstandings about equity. Deals slowed not because founders lacked ideas, but because expectations across the ecosystem were misaligned.

This wasn’t a pipeline problem in the sense of “not enough startups.” It was a legibility problem — a lack of shared signals about readiness. Where business support organizations adapted and founders received more consistent guidance, transaction costs dropped quickly. Where they didn’t, fatigue set in just as fast.

Investment, it turned out, was also a diagnostic tool.

Why Capital Finally Began to Flow

Another inflection point came when early angel investments were combined with complementary instruments. Matching mechanisms like develoPPP didn’t just increase capital — they changed psychology.

Grant-matched investment absorbed first loss, extended runway, and signaled seriousness. For several investors, this shifted decisions from “interesting, but risky” to “worth trying.” Development finance institutions played their most effective role not as substitute investors, but as market architects — supporting coordination, experimentation, and readiness.

Small checks started to feel less isolated. A sense of system began to emerge.

From Improvisation to Repeatability

As activity increased, informality became a constraint. Volunteer-led coordination struggled to keep pace. Processes slowed. Expectations diverged. These weren’t failures — they were signs of growth.

The gradual move toward clearer governance, administration, and process marked a quiet transition: from experimentation to repeatability. Not scale yet — but durability.

Around the same time, regulators began engaging more actively. Not to regulate immediately, but to understand. Policy followed practice. Dialogue replaced assumption. Uncertainty didn’t disappear, but it became navigable.

What Tanzania Taught Me About Domestic Capital

Looking back, none of these moments felt dramatic at the time. There was no single reform, no breakthrough deal, no overnight transformation.

What happened instead was alignment — imperfect, uneven, but cumulative.

Capability improved. Risk was shared. Trust formed. Capital stacked. Institutions adapted. Policy followed.

This is why I no longer think of domestic capital as a funding gap. I think of it as infrastructure — something that has to be built, aligned, and maintained before it can carry weight.

Tanzania isn’t “done.” But it has shown something important: when enough pieces move together, even modest actions can unlock momentum.

And perhaps most importantly, it reminds us that capital doesn’t move because we ask it to.

It moves when the system makes it possible.

About the Author

Ben White is the founder of Sanaga Ventures and has spent over 20 years supporting startup ecosystems across Africa, including as co-founder of VC4A, AfriLabs, ABAN, and the Africa Early Stage Investor Summit. This essay reflects practice-based insights developed through long-term engagement in Tanzania and beyond.