Are competitions bad for Kenya’s tech scene?
How we made it in Africa's Dinfin Mulupi talks to Lino Carcoforo, co-founder of I4A, an investment company focused on technology startups in east Africa.
Lino Carcoforo is a co-founder and managing partner of Innovation for Africa (I.4.A.), an investment company focused on technology startups in east Africa. Carcoforo tells How we made it in Africa's Dinfin Mulupi about the opportunities, challenges and future of technology in east Africa. What inspired you to start I.4.A.?
The idea was conceived after my partner Nancy Wang and I co-founded a mobile phone based recruitment platform called M-Kazi. Despite being able to seed finance our venture, Nancy and I experienced firsthand the impact of the lack of early stage funding at the market level. So we engaged investors and started I.4.A. to finance startups, help them gain traction, achieve proof of concept and mitigate risks that later stage investors associate with early stage ventures, for example: Does the technology work? How scalable is the idea?
We typically invest $30,000 to $50,000 in mass market mobile technology ventures and provide technical assistance. We provide help in streamlining their businesses and mitigating risks involved in successfully launching ventures. Right now we have four ventures in our portfolio. These are: M-Kazi, M-Changa, Virtual Blackboard and Dial a Teacher. We are also actively looking at other investments. We maintain a minority stake in all our ventures, rarely exceeding 20%, because we believe taking anything more than that kills the entrepreneur’s motivation to make a success of his/her venture.
You have been critical of the many technology competitions being held in Kenya. Are they not good for the sector?
There are certain ventures that make money from running the competition circuit. I think it is counterproductive to the whole essence of entrepreneurship. I think when money is given to an entrepreneur there is a certain level of accountability when it is from an investor. Free money from competitions will only hurt the industry. There is a general vibe around the startup scene that really undervalues the expertise that an investor can bring in terms of networking, access to people who can structure and streamline their businesses and experience.
What are your investment criteria given that Kenya is not short of technology startups?
We look for mass market mobile phone based applications. We look for ventures that will work on a basic mobile handset and can impact the masses by giving users access to information. The businesses we have invested in so far have proved to be viable, scalable ventures. There are two funds currently monitoring our M-Kazi venture closely and are keen to come on board for second round and potentially Series A investment. M-Changa, a mobile based fundraising tool, is also being observed by several investors who want to come in further down.
How will you exit your investments?
The seed fund space here is very much in the early days. I.4.A. has been very trigger happy in the first half of the year and now we aim to build and nurture these ventures, while keeping potential follow on investors abreast of our progress. We want to show institutional investors that there is a potential exit and return on their investments.
You interact with a lot of technology entrepreneurs in Kenya. Do you think they have what it takes?
Techies in Kenya are at par with those in India and Silicon Valley. The only issue that they don't focus on is how to commercialise their innovations. They also tend to neglect the end user. Focusing on the end user ensures greater adoption. It is interesting that some of the most successful technology companies are founded by non-tech experts because they address these issues. Kenya's technology entrepreneurs need to focus on their target market, testing theories and carrying out focus groups. People are ready to pay if you can show that they need your service. It is a no-brainer. In terms of creativity we are good. We just have to work on how to monetise our businesses.
Where do you see the industry in five years?
I expect to see more funds targeting startups, a lot of capital in the industry and entrepreneurs that have failed once or twice and are now hitting success. Failure is important as it teaches you what not to do and manages people’s expectations. The ride to the top is seldom smooth. As is demonstrated by the likes of Kamal Budhabhatti of Craft Silicon and John Waibochi of Virtual City – both currently running successful businesses and both having started them from scratch.