The 2011 East Africa Private Equity Confidence Survey, released last month by Deloitte, reveals that private equity activity will increase over the next twelve months in east Africa, where investors are targeting high growth small and medium enterprises. How we made it in Africa spoke to fund managers to find out what they are looking for in prospective investees.
According to Nikolai Barnwell, managing director of investment fund 88mph, flexibility is a must and entrepreneurs should shape their ideas to fit the market.
“Entrepreneurs should not be focused on one idea to the extent that they let better opportunities go. It may be honourable, but stupid in a business sense. If you are too rigid and not flexible you will definitely lose out on great opportunities. Entrepreneurs should find out what people will be willing to pay for and give them that,” said Barnwell.
It is said that everyone is passionate about something. Investors don’t bet on entrepreneurs who have grand ideas, but those who are passionate enough to risk everything to see their dreams come true.
“Ideas are worthless. We look for people who are passionate and are willing to give it their all. They should work round the clock and do everything to make their business a success,” noted Sean Smith, analyst and manager of new investments at Invested Development.
Alex Stil, a fund manager at eVentures Africa Fund, reckons that an entrepreneur without a good team is headed nowhere. “We look for entrepreneurs who are working with the right people. You should build and mentor your team to compliment on your strengths. They should understand your product and believe in your vision for the business,” said Stil.
Eelco Benink, an investment manager at InReturn Capital, added that an entrepreneur should have credible partnerships with other skilled and experienced people.
“When investing in technology for instance, we would want a team that has expertise in technology as well as business management and marketing. They should also have been successful in the past and can demonstrate a good knowledge of the market,” he said.
Benink reckons that entrepreneurs should demonstrate commitment and be willing to take risks. “We would not invest in an entrepreneur who is involved in ten different businesses at the same time. When things get tough the entrepreneur will abandon the project because they have nothing to lose.”
Stil said that entrepreneurs should be willing to make sacrifices to see their businesses grow. “An entrepreneur should demonstrate that they are not looking for a free ride.”