Does bigger still mean better? How seed capital affects performance of Jua Kali enterprises in Kamukunji, Kenya

Abstract

Despite the significant economic contribution of the jua kali enterprises, the industry is beset by fundamental financial issues that limit their firm performance. Consequently, many of these enterprises fail soon after they open for operation; 50% to 95% fail during the first five years. The development of seed capital is one of the main issues affecting the firm performance of Jua Kali enterprises. This research assessed the effects of seed capital on firm performance of Jua Kali enterprises in Kamukunji, Nairobi City County, Kenya. The specific objectives were to; establish the effect of angel investors, equity financing and crowdfunding on firm performance of Jua Kali enterprises in Kamukunji, Nairobi City County, Kenya. The anchor theory was the Resource-Based View, Pecking Order Theory, and Information Asymmetry Theory. The study used quantitative methods, applying positivism paradigms. Both explanatory and descriptive research designs was used in this study. The target population was the 4763 Jua Kal enterprises in Kamukunji, Nairobi City County, Kenya and unit of enquiry their managers/owners. Using, a formula, the study obtained a sample size of 367 respondents. The study used stratified proportionate sampling and simple random sampling to obtain respondents from the associations. Construct validity was used to examine the questionnaire's validity and Cronbach's alpha at the 0.7 level was used to test its reliability.  Data was analysed to produce descriptive and inferential statistics. The results from the analysis were presented on frequency tables.  The study found that each of angel investors, equity financing and crowdfunding, has significant effect on firm performance of Jua Kali enterprises in Kamukunji, Nairobi City County, Kenya. The study recommends for angel investors to be active not only in providing finance but also in strategic mentorship and networking, and advisory services. For entrepreneurs, internal equity financing should come first while the potential of crowdfunding can be harnessed by training business owners. More so, entrepreneurs should build management skills, financial literacy, and strategic abilities while the government and regulatory bodies should streamline policies and clarify compliance requirements with supportive tax incentives.

Keywords: {'name': 'Entrepreneurial experience, Seed Capital, Angle investors, Equity Financing, Firm performance, Jua Kali enterprises, Crowdfunding'}

Authors & affiliations

Wanja Wangongu
Kenyatta University

Stephen M.A. Muathe
Kenyatta University

Eliud Obere
Kenyatta University

Deposited references

Supplied references, not a list of publications citing this article.

DOI: 10.12691/jbms-13-4-5

DOI: 10.3390/risks11060102

DOI: 10.2307/1879431

AL-Mubaraki, H. M., & Busler, M. (2017). The Impact of Innovation Best Practices in Economic Development. International Journal of Economics and Management Engineering, 11(4), 993-999.

DOI: 10.34257/GJMBRAVOL20IS3PG7

DOI: 10.1287/mnsc.32.10.1231

DOI: 10.1177/014920639101700108

Baron, R. A. (2007). Behavioral theories of entrepreneurship. Edward Elgar Publishing.

DOI: 10.1016/j.infoecopol.2015.08.003

DOI: 10.1515/erj-2023-0246

DOI: 10.1080/13504851.2019.1676383

DOI: 10.2307/3250983

Bitta, F. O., & Omagwa, J. (2022). Credit Affordability and Financial Performance of Small and Medium Enterprises in Machakos County, Kenya. Unpublished thesis Kenyatta University.

DOI: 10.1111/eufm.12537

DOI: 10.1111/1467-8551.12526

Chindengwike, J. (2021). Effect of equity on financial performance among small business firms in East Africa countries.

DOI: 10.1002/jsc.593

DOI: 10.5267/j.msl.2020.11.026

DOI: 10.1002/smj.323

DOI: 10.4135/9781848608313.n7

Eisenmann, T. (2013). Entrepreneurship: A working definition. Harvard Business Review.

DOI: 10.1016/j.iedeen.2020.03.001

Financing start-ups, the need, relevance, facets and constraints in Kenya start-ups ecosystem. International Journal of Academic Research in Business and Social Sciences, 13(1), 843-8.

DOI: 10.1177/014920639101700112

DOI: 10.1177/1056492606287793

Githire, C., & Muturi, W. (2015). Effects of capital structure on financial performance of firms in Kenya: Evidence from firms listed at the Nairobi securities exchange. International journal of economics, commerce and management, 3(4), 1-10.

DOI: 10.2139/ssrn.4483015

DOI: 10.1002/smj.3484

DOI: 10.21300/18.4.2017.305

DOI: 10.1177/02662426231201761

Hockerts, K. (2015). Social entrepreneurship: A research agenda. In M. J. R. (Ed.), The Palgrave Handbook of Social Entrepreneurship.https://www.knbs.or.ke/download/economic-survey-2023.

DOI: 10.1186/s43093-024-00387-5

DOI: 10.1016/j.jbusvent.2014.10.001

DOI: 10.4018/IJABIM.318338

DOI: 10.3390/su12083447

DOI: 10.1080/13691066.2012.660743

DOI: 10.46609/IJSSER.2023.v08i04.005

DOI: 10.47772/IJRISS.2023.70609

Karitu, B., Muathe, S. M., & Mwasiaji, E. (2025). Business Incubator Services in Africa Higher Education: Disruptive Force Or Necessary Tool For New Venture Creation In Kenya. African Journal of Emerging Issues, 7(21), 128-147.

DOI: 10.20525/ijrbs.v11i4.1782

DOI: 10.46609/IJSSER.2023.v08i04.007

Kenya National Bureau of Statistics. (KNBS) (2023). Economic survey 2023. Government printer.

DOI: 10.1007/978-3-032-13732-6

DOI: 10.1108/JHTI-10-2021-0270

DOI: 10.1111/j.1468-2370.2008.00252.x

DOI: 10.54518/rh.2.6.2022.587-596

DOI: 10.3390/su142315865

DOI: 10.2139/ssrn.3138418

DOI: 10.1080/1331677X.2022.2063920

DOI: 10.1257/aer.20130479

DOI: 10.1002/1099-1697(200006/07)9:4<209::AID-JSC485>3.0.CO;2-G

Miles, J. A. (2012). Management and organization theory: A Jossey-Bass reader. John Wiley & Sons.

DOI: 10.1515/erj-2015-0042

DOI: 10.13152/IJRVET.11.1.5

DOI: 10.1016/j.tate.2022.103919

Muathe, S., & Otieno, V. (2022). Startup Incubation and Accelerators In Africa; Are Start-Ups Scaling Up in Kenya.

Mugambi, W. M. (2020). Effect of accelerator programs on business success among technology startups in Kenya (Doctoral dissertation, Strathmore University).

DOI: 10.30845/ijbss.v10n5p7

Mwiti, E. (2022). Influence of Cost Leadership Strategies on Performance of Jua Kali Garages In Thika Sub County, Kiambu County, Kenya. International Journal of Social Sciences and Information Technology, 8(10), 2412-1294.

DOI: 10.1016/0304-405X(84)90023-0

Nakalembe, I., Dushime, J., Makuei, Y., Kwitonda, A., Hakizimana, S., & Muathe, S. (2023).

DOI: 10.4067/S0718-52862018000200301

Ngugi, L. N. (2025). Effect of Financial Inclusion on the Financial Performance of Registered Jua Kali Metal Fabricators in Nyeri County

Nguyen, V. H., Nguyen, T.T. C., Nguyen, V. T, Do, D. T. (2021). Internal Factors Affecting Firm Performance: A Case Study in Vietnam. Journal of Asian Finance, Economics and Business, 8(5), 0303–0314

Njagi, J. N., Aduda, J., Kisaka, S. E., & Iraya, C. (2017). Capital structure, firm efficiency and firm value: The case of listed non-financial firms in Kenya. European Journal of Business and Management, 9(22), 71-81.

Onyeka-Iheme C. V. &, Akintoye I. R. (2022). Development of Small and Medium Scale Enterprises (SMEs) in Africa Through Crowdfunding. International Journal of Business and Economics Research. 11(5), 287-294. https://doi.org/ 10.11648/j.ijber.20221105.13

DOI: 10.1108/JSBED-04-2021-0155

DOI: 10.1287/orsc.1060.0244

DOI: 10.5465/amr.2001.4011928

DOI: 10.55640/eijmrms-02-05-18

Ratnawati, K., & Soelton, M. (2022, December). The Role of Digital Financial Literacy on Firm Performance in Micro Industry. In ICCD (Vol. 4, No. 1, pp. 95-101)

DOI: 10.4337/9781781007990

DOI: 10.1504/IJESB.2024.142444

DOI: 10.1108/APJIE-04-2023-0071

DOI: 10.2307/1882035

DOI: 10.19044/esj.2019.v15n1p93

DOI: 10.1002/smj.640

DOI: 10.1016/j.lrp.2009.07.003

DOI: 10.1007/s11187-016-9827-5

Tomomewo, A. & Akintoye, I. (2022). Development of smes in Africa: The role of crowdfunding. International Journal of Entrepreneurship. 25(1). 1 - 16.

DOI: 10.3390/jrfm19010001

Umana, M. (2019). Seed Capital and the Equation of Investment in Entrepreneurship. International Journal of Management and Business. 10(1), 90-101.

DOI: 10.2139/ssrn.3842228

DOI: 10.46609/IJSSER.2023.v08i04.009

DOI: 10.47772/IJRISS.2023.70523

DOI: 10.1002/smj.4250050207

DOI: 10.1142/S1084946720500144

DOI: 10.1108/MD-04-2023-0558

DOI: 10.1057/s41599-022-01207-3