A bold vision. High technical ability. Risk-taker. The willingness to bring partners on board.
These are some of the characteristics the Savannah Fund looks for in entrepreneurs. The Savannah Fund is a seed capital fund specialising in US$25,000-$500,000 investments in early stage technology (web and mobile) startups in sub-Saharan Africa. Initially focused on East Africa, the fund aims to bridge the early stage/angel and venture capital investment gap that currently exists in Africa. The fund’s three main partners are tech heavyweights Mbwana Alliy, Erik Hersman and Paul Bragiel.
In a recent article, Mbwana Alliy, the managing partner of the fund, outlined three types of entrepreneurship found in Africa today.
The first one is survival entrepreneurship, which is characterised by low-skilled informal businesses. The second is what Alliy calls lifestyle businesses, typically ventures of 5-25 employees with founders that want to be in charge of their own destinies, frequently also family businesses. These companies often want to grow bigger, but not outside their own country borders or the scope of the founder’s skills.
The third type of entrepreneurship is high growth ventures that, if successful, generate significant returns for their investors and create thousands of jobs. These are also the type of businesses the Savannah Fund wants to invest in. “At Savannah Fund we are interested in the third high growth (and consequentially, high risk) type of entrepreneurship which matches up well with the technology (web and mobile) sector given the ability to scale out fast and hence achieve rapid growth,” said Alliy.
“We bet on the founder and aim to be their business partner, connecting them to both our local and Silicon Valley mentor and investment community who have experience and focus 100% on tech,” he continued.
A few months ago the Savannah Fund made its first investment in biNu, an app that gives basic feature phones the capabilities of a high-end smart phone-like device. BiNu was founded by Zimbabwean born Gour Lentel who now operates from Australia. Although biNu is technically not based in Africa, the continent is currently one of its fastest growing markets with over one million active users.
In the article Alliy also explained that the Savannah Fund is not a charity or a social enterprise, but rather 100% for-profit. “We are on the side of for-profit private equity – so pitching us a charity or social enterprise is not a good fit.”
He highlighted the importance of a strong relationship between the venture capital (VC) firm and the entrepreneur. “An investment in a company is like a marriage, it’s not a one time deal and then we walk away, some companies we could be working with for 5-10 years. So building a relationship matters. It allows us both to decide if it might be a good idea to work together.”
He said there is a better chance that the Savannah Fund would invest in entrepreneurs that the partners are already acquainted with. “So get to know Erik, myself and Paul over time and this improves chances dramatically. It is no secret that I am found around the iHub (a Nairobi-based business incubator and co-working space) getting coffee in the mornings from 8 a.m.-10 a.m. [Here] I am typically also at my most engaged. I am a morning person, so am hungry to hear any interesting news then versus at 3 p.m. when I just battled Nairobi traffic for various meetings and errands and have a ton of e-mail to attend to.”
However, all is not lost for entrepreneurs in other parts of the continent. “If you are a startup in Nigeria or South Africa, it’s just that much harder to build a relationship, but still possible as we showed in our first deal with the company all the way in Australia. We do travel and we are building strong links with other investors across the continent who share our philosophy and approach to serving tech startups.”
The Savannah Fund is primarily focused on businesses with an African customer base or those selling a product or service uniquely African to the world, but it doesn’t just fund local teams. “Many ventures abroad might need an investor in Africa to help inform them here; many African ventures might need connections abroad to help them scale and source further investment abroad – we can help with both … We are global to the core, we expect a lot of our startups to be like-minded,” Alliy explained.