Ethiopia’s Start-up Market Comes of Age
By Aksah Italo
Published on 09/29/25
From turning coffee waste into bio-oil to digitizing Ethiopia’s traditional saving systems, a new wave of start-ups is rewriting the country’s entrepreneurial culture and shaping its economic future.
One such pioneer is eQub financial technologies, a fintech company that has modernized one of Ethiopia’s most trusted financial traditions. Equb, a rotating savings scheme, has long been a source of credit for households excluded from formal banking. Seeing an opportunity to bring this system online, co-founder Alexander Hizikias and his team took a leap of faith.
“We saw something in equb and we digitized it,” Alexander recalls.
Launched in August 2020, eQub faced immediate challenges. Ethiopia’s digital infrastructure was still underdeveloped, and there was no regulatory framework to guide tech startups.
One of the features of the app includes tracking members’ contributions, displaying the number of completed cycles, and alerting users of missed payments, bringing transparency and convenience to a centuries-old practice.
"We threw ourselves in with a leap of faith," he says.
Despite the odds, the company gradually secured 10,000 dollars in risk capital from investors and benefited from the arrival of digital payment operators and issuers such as Chapa, ArifPay, and Telebirr, which created an enabling environment for integration. Today, eQub boasts more than 110,000 users and has set an ambitious target of three million by 2026.
“We have set ambitious targets for the company,” Alexander says.
eQub is a glimpse into the rising tide of Ethiopia’s tech-ecosystem.
Dealroom, a global data provider, reports that the country is now home to more than 430 startups, ranging from seed-stage ventures to scale-ups. Among the most recognizable names are Kacha, Chapa, ArifPay, Equb, GUZO technologies, and Qene Gaming, companies that have attracted investments between 10,000 and 250,000 dollars.
This momentum comes amid ambitious reforms under Digital Ethiopia 2025, the government’s blueprint for building an integrated digital economy. Prime Minister Abiy Ahmed (PhD) has pledged to invest in artificial intelligence, robotics, smart manufacturing, and renewable energy, signaling a long-term vision that extends to 2050.
The results are already visible. According to StartupBlink, over the past decade, total startup investment in Ethiopia has surpassed 82.77m dollars. This accounts for 1.73 percent of the total startup funding in Eastern Africa.
As funding becomes increasingly competitive in hubs like Nigeria, Kenya, Egypt, and South Africa, Ethiopia is emerging as a promising new frontier for investors.
Bayissa Baddada, state minister at the Ministry of Innovation & Technology, affirms that Ethiopia’s improved ranking signals a strategic shift toward a knowledge-based, innovation-driven economy.
"We are accelerating startups' impact through targeted policies, digital infrastructure. Our youth are the architects of this transformation," he indicated.
After over five years of deliberation and revisions, Ethiopia’s parliament recently ratified the country’s first Startup Proclamation, a milestone that provides long-awaited legal recognition to startup businesses.
The law defines and classifies startups, creates clearer pathways to financing, and introduces structured incentive schemes to encourage innovation.
“This is a watershed moment for Ethiopia’s start-ups,” says Nebiyou Yirga, general manager of the Ethiopian Association of Startup Ecosystem.
For years, he explains, the absence of a clear legal framework forced start-ups to operate in a gray zone, leaving them vulnerable and limiting their ability to scale.
“We’ve been pushing for this proclamation for a very long time,” he says.
He says that start-ups can officially register, gain legitimacy, and access the incentives they need to grow.
Nebiyou believes the new law, with its provisions for tax holidays, legal identity, and financial incentives, will help the ecosystem mature and attract more investment.
The association is now focused on ensuring the proclamation is implemented fairly and consistently.
“Our job now,” he says with a wry smile, “is to make sure the implementation and the impact of the law isn’t watered down,” he said.
If these trends hold, Ethiopia may yet position itself as Africa’s next innovation hub, provided it can overcome its structural challenges and ensure that this entrepreneurial revolution reaches beyond the capital city.
Sam Altman, CEO of OpenAI, once remarked that “building a startup is a 10-year commitment.” For Ethiopia’s founders, that commitment now comes with a clearer legal framework, a growing investor appetite, and a government that appears ready to back innovation.
Experts agree the new proclamation marks a turning point for Ethiopia’s entrepreneurial ecosystem, one with the power to reshape the nation’s innovation landscape.
“It brings much-needed legal clarity by recognizing startups as a distinct business category,” says business consultant Moustafa Abdella.
He notes that the law’s proposed tax holidays and reduced rates could be a lifeline for early-stage founders.
“When every birr counts toward survival, better cash flow can be the difference between shutting down and scaling up,” Moustafa explains.
But he also cautions that the true test lies ahead.
“The proclamation’s impact will depend on how faithfully it is implemented and whether authorities can sustain their commitment,” he says.
Moustafa warns of the risk that complex procedures could reintroduce the very bureaucracy the law was meant to eliminate. He calls for political will across future administrations and insists that the benefits must extend beyond Addis Ababa, ensuring that entrepreneurs in secondary cities and rural regions are not left behind.
Despite these advances, Ethiopia’s startup ecosystem is still in its early stages. Entrepreneurs face limited access to financing, shortages of technical talent, and underdeveloped infrastructure such as coworking spaces and accelerators. Connectivity also remains a hurdle, with Ethiopia averaging just one startup per 100,000 people, trailing several East African peers.
A report on Substack paints a sobering picture of Ethiopia’s startup funding scene: the country mobilized one billion dollars less than Kenya in 2022.
The report, which tracks startup financing across Eastern Africa, reveals that Ethiopia attracted just six million dollars, a mere 0.5 percent of the region’s total. In stark contrast, Kenya commanded a staggering 1.16 billion dollars, cementing its status as East Africa’s innovation capital.
Even Tanzania, Uganda, and Sudan outperformed Ethiopia in channeling funds to their entrepreneurial sectors, underscoring the gap Ethiopia must close if it hopes to compete as a serious tech hub.
Even more, for Ethiopia’s young entrepreneurs, the journey remains fraught. With formal employment prospects narrowing and venture capital still maturing, many are forced to bootstrap their way forward.
Systemic challenges persist. Banks remain reluctant to finance asset-light businesses, foreign exchange shortages limit access to cloud services and imported technology, and early-stage investment opportunities are still scarce.
Many industry insiders say that Diaspora and investor involvement remains a key driver, injecting capital, technical expertise, and global networks. Incubators and accelerators such as Blue Moon, Growth Africa, Startup Factory Ethiopia, and X Hub Addis are working to provide mentorship and seed funding.
Moustafa, the business expert, argues that Ethiopian authorities can do more. He says that establishing government-backed venture funds, offering tax incentives for angel investors, and creating credit guarantees specifically for tech startups could transform the landscape.
“A lot more work is expected to enhance the start-up ecosystem,” he said.