The Savannah Fund is a seed capital fund founded by African and Silicon Valley entrepreneurs that specialises in investments in sub-Saharan African technology startups, with an initial focus on east Africa. Mbwana Alliy, founder and managing partner at the Savannah Fund, shares with Dinfin Mulupi his plans for the fund, as well as his thoughts on the state of technology in the region and why Africa’s entrepreneurs should think of relocating their businesses to Silicon Valley.
You visited Kenya in December 2010 together with Silicon Valley entrepreneurs Russel Simmons and Paul Bragiel. How did that go?
We wanted to understand the startup scene. That was the purpose of the first meeting. [Consumer review website] Yelp co-founder Russel Simmons mentored some entrepreneurs here. From that meeting we have been working on a couple of things. Paul Bragiel, Erik Hersman (co-founder of Ushahidi) and I have started a seed capital fund, Savannah Fund. We are looking to invest in mobile and web startups. We intend to invest in about 35 startups over time. As part of the accelerator programme we will give seed funding to classes of five early stage, high-growth startups of about $25,000. They will then have three to six months to prove themselves.
The second part of the fund will be a follow on investment to some of the companies of between $100,000 to $200,000. We expect many to fail. When you angel invest you are going to have failures. Out of failure comes good learning. We want to help build the technology scene, but a lot of entrepreneurs don’t understand how things work. I have seen failures in Silicon Valley all the time. Sometimes you fund an entrepreneur who has failed twice and they succeed a third time because they have learnt a lot. We expect maybe even half of the 35 companies we hope to fund will fail. As we continue to invest in the successful ones, the risk will become less and less. One thing we need to change in east Africa is that there is no shame in failure.
You have been active in Silicon Valley, but you are originally from Tanzania. What do you think about the technology scene in Tanzania?
It is improving. I spent a lot of time in the last two to three weeks there. Before I did not like the technology scene there because it was very much government controlled. Now I see the private sector being involved and creating hubs. This is what is needed to grow the sector.
What about the greater east African region?
A lot of the money here goes to less risky investments like real estate. There is not a lot of early stage investment and that is why we started Savannah Fund. For the east African ecosystem to improve we need a lot of angel investors.
What advice would you give to African tech entrepreneurs?
Entrepreneurs are not focused enough. They are doing multiple things. But I understand why. However, when it comes to seeking financing, you have to be committed to your idea 100%. All over east Africa there are too many startups, scattered and unfocused.
I noticed a conversation on Twitter where you talked about talented entrepreneurs moving to Silicon Valley until their home markets get big enough. Please expand on this.
Silicon Valley can be your super highway to get a lot of things done, like funding and access to better talent. There is no question that the best talent in the world is in Silicon Valley. They have all moved there. I moved there, but now I am back.
If a startup is doing well here, they should consider moving to Silicon Valley and compete there in the global market. But at the same time someone can succeed here. But they need to move at some point. Even [Mark] Zuckerberg had to leave Harvard to go to Silicon Valley. You have to go where you are appreciated. East Africa has its own ecosystem and entrepreneurs can succeed in their home markets, but, if you want to build a really big, truly global company, you have to consider other areas and Silicon Valley is definitely top on the list. If I do find a really amazing company, I can help it reach the big league.
However, one should also be cautious. Imagine if you have a company that is doing well in Kenya, but average in Silicon Valley and you expose it too early; it might hurt it. You don’t want to expose it too early, but you also don’t want to never expose it. Question is: when is the right time?
What do you think of Kenya’s ambitious Konza City project (a planned high-tech hub inspired by Silicon Valley)?
I think it is just a real estate project, it is not innovation. Don’t confuse Konza City with creating entrepreneurs and innovation. It is an interesting project. A lot of people see it as the crown jewel of what technology in Kenya is. I don’t think that’s the case. We should be investing in entrepreneurs, developers and more technology hubs. The hub could be in the middle of a slum, but you could still find the next Zuckerberg. It is not about the building, it is about the culture and the things I have talked about like failure, learning and taking risks. I am grateful though that Kenya is attracting foreign investors as well as technology entrepreneurs from across the world.