Beyond the Funding Gap: Mobilising Domestic Capital Under Institutional Thinness: The Domestic Capital Flywheel
Keywords:
Domestic capital, Entrepreneurial Ecosystems, Early-stage Finance, Angel Investing, TanzaniaAbstract
Across emerging entrepreneurial ecosystems, substantial domestic wealth often coexists with limited early-stage investment. This study examines how domestic private capital becomes mobilised within an institutionally thin entrepreneurial ecosystem, using Tanzania as an empirical case. The analysis draws on 24 in-depth, semi-structured interviews with angel investors, founders, intermediaries, financiers, programme managers, and policy actors, supported by documentary evidence and contextual field engagement. An iterative thematic analysis identified six interconnected dimensions of domestic capital mobilisation: trust and community building, investment capability formation, capital stacking, syndication and shared risk, intermediary coordination, and policy and institutional evolution. The findings show that limited early-stage investment is not explained solely by capital scarcity. Domestic wealth becomes investable only as relational, organisational, financial, and institutional capabilities develop together. The study therefore argues that domestic capital mobilisation emerges through entrepreneurial ecosystem development rather than existing as a precondition for it. It develops the Domestic Capital Flywheel, an empirically grounded model explaining how the six dimensions reinforce one another to transform latent private wealth into coordinated early-stage investment. The study contributes to entrepreneurial ecosystem and entrepreneurial finance research by reframing early-stage financing constraints as a problem of mobilisation and coordination rather than capital availability alone.
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