While many venture capital funds have set up shop in Kenya in recent years, most have focused on investing in already established businesses with proven ideas and concepts. 88mph, an investment fund specialising in seed funding for the east African mobile and web market, is changing the tides, giving entrepreneurs the opportunity to take their ideas to the market. Head of Operations at 88mph, Nikolai Barnwell, tells How we made it in Africa’s correspondent Dinfin Mulupi why the disruptions in the Kenyan market mean big business.
Tell us about 88mph and what you do.
88mph is a €400,000 fund started in August last year. This was an idea a group of Danish investors and we initiated with making four investments in August, three of them through IPO48 – a 48 hour pitch contest. We now have eight investments. We were motivated by the fact that there is a great opening in the mobile web space. Our only criterion is that a potential investee should have a product that focuses on consumption through mobile web. We want to prove that you don’t need millions and millions of dollars to do this. The people behind it are Kresten Buch, Ivan Larsen and myself.
What kind of investments do you look for?
We are looking for [projects] that are very much in the early stages. We want to help build products, take them to the market and try to prove that they work. Once the product has users and we built some traction that is when we take the business to the next round of funding. We basically leverage the high risk and seek high returns. We give the seed funding to prove that the concept works and get traction.
How much stake do you take in a company and do you have an exit strategy?
The stakes vary greatly from startup to startup. It depends on many factors such as risk and maturity of business and entrepreneurs. There is no set formula. We don’t have any particular exit plans in mind when we start off. There are no major tech exits in Africa so far. The environment in Africa is not that mature. We just see a massive opportunity in this market. We build the companies because we really believe in it. The idea is that after the business has grown it would get follow on investments and scale up in the rest of Africa.
Why did you choose to invest in Kenya?
I think Kenya has remarkable opportunities. Since 2009 when the first fibre optic cable landed in the country there has been an explosion in internet usage. It is only going to go one way. The prices are going to get better, it is going to be competitive and already the capacity is theoretically unlimited.
The other aspect is the big disruption because Kenyans are skipping laptops and going straight to their mobile phones for internet access. Every time there is a disruption there is a huge opportunity for new and young people to come and take advantage of the disruption.
Lastly, social media has been taken in very wholeheartedly by Kenyans. People use social media on mobile phones. If you understand how that works you can take advantage of the massive market and the completely underserved as well as areas where big corporate firms do not understand how to take advantage of this disruption. In Kenya there is a convergence of massive use of social media, growing access to internet through mobile phones and a completely underserved market. Generally across Africa, Kenya is the place to be right now. I can bet that in ten years there will be a substantial number of IT millionaires in Kenya because of these disruptions I am talking about.
Which other markets do you find interesting?
Nigeria is interesting especially since the launch of fibre optic cables in 2010 bringing faster internet speeds. Nigerians are very smart, they have a big population and they are hungry for success. We are looking to expand to Nigeria and South Africa.
We are planning to have 30 investees in one and a half years. We plan to take 200 entrepreneurs to the IPO48 competition and narrow down to around eight to ten whom we will give around US$5,000, three months office space and mentor them. In the three months they will show us their team, their commitment, their idea and how quickly they can get things moving.