Wow, well this was unexpected. Keanu Reeves and Halle Berry’s John Wick Chapter 3: Parabellum debuted a number one on the SA box office…
Seed accelerator 88mph’s Nairobi director Nikolai Barnwell spoke to Ventureburn about its upcoming three-month acceleration programme in the Kenyan capital: what they look for in a startup, mentors and the African investment space. Whether you’re an entrepreneur considering entering the programme, or just interested in tech in Kenya and Africa, you won’t want to miss this Q&A.
What does 88mph value in a startup? Are you looking for innovation or sound business models?
I don’t think they necessarily contradict each other. More often than not they do work alongside each other. Primarily we look at teams.
In such an early stage in a tech startup, you are 100% going to be doing something different than what you think you are going to be doing. You are going to be pivoting multiple times, changing your business model, you make so many changes, sound business is not really at all what we are looking for.
In terms of innovation: we are first and foremost a commercial fund, so we’re not set up to support innovation, we are set up to give returns to investors. We are more about: does this work? Is it an interesting market? And first and foremost is it a good team?
88mph is looking for a startup to solve real African challenges – what do you consider the most important challenges that you would like to see solved from the 88mph setup?
I’ve actually never thought of that. In a place like Nairobi for instance, the country has such a good pace, good momentum and attitude right now. But the reality is that most of the country needs to be built – we need to build the infrastructure, the judicial system, there is so much stuff we need to build. This is where we want entrepreneurs to come in and build solutions that really work for these things.
Personally I would like to see someone commercially create some sort of tech platform that would give citizens a chance to battle corruption better. There are still a lot of hurdles to starting businesses, and getting above your daily lives due to corruption, and an inefficient judicial system, so somehow if there was a commercially viable model of doing that it would be very interesting. A model where you get a finder’s fee cut for exposing corruption. It might be fun to do.
In terms of scalability, if a startup had a product that was globally scalable and not just in Kenya and Africa, would that be something 88mph would be receptive to?
Yes of course. I think the competitive edge for startups here is the fact that you’re not going to get startups in Silicon Valley focusing on building stuff for the Kenyan market, and it’s not going to start any time soon.
So we see the true opportunity, which is why we are based in Africa, in Kenya and Cape Town, because there are so many things you can do here that can make great businesses.
It’s a billion people consumer-market that is going to ripen in the next five to 10 years so I don’t think you have to think of constraints. If you look at the demographics, they say that by 2050 more than half of the work force in the world will be in Africa, and by 2025 a quarter of people under 25 will be Africans. So it’s a big looming giant that is going to explode in the next five to 15 years, and that is the timeline it takes to build a successful company, so you are riding that intense demographic wave.
What is the balance in the kind of training 88mph offers, is it more business and market training, or dev skills?
That depends a lot on the startups. Some startups we barely touch because they are already very good. We help them with board decisions, management hires, and funding. Other startups need a lot of help with small day-to-day operational things, like how to put together a project, how to make sales, how to build and test a product. So it ranges.
We try to put together a very resourceful team on our part, so we have in-house developers, graphic designers, legal, finance, consultants, product people, fundraisers, investor-relations, networking – we try to spread it as wide as possible.
Basically in that short span of three months where you take your company from a couple of guys with a fun idea, through to taking it to market and raising money, it’s such a steep learning curve and there are so many different kinds of skills you need, we don’t really tailor programmes. The only thing that is pervasive through all of them is pitch training – because that is something they all always need – getting over your fear of standing in front of people and selling your product and getting people excited in your company.
What is the initial investment variable?
It is up to US$100 000. We’ve done bigger in the past, but that is quite an anomaly, and we probably won’t do that again because it was pretty heavy risk on our side, and the model doesn’t really work like that. Typically we will invest about 20-30k in a startup. It depends on the quality of the team.
We’ve raised it up to 100k because we want to get a more serious quality of entrepreneurs, and not only green out-of-college entrepreneurs, so to attract those we had to make the carrot bigger.
We’ve set some guidelines before, like in the past we’ve said we’ll give US$6000 to to US$10 000 per founder and take between 8%-15%. But the guidelines never hold because you get such a wide array of entrepreneurs in terms of quality and which stage they are in, so we can’t just set straight terms yet.
And who are the backers of the fund?
In Nairobi it is all private, with three directors in the fund, and it’s basically just our personal networks that have put in money. The idea is that we put in private personal networks to prove the concept to run through these two programmes, but in the future we will start to open up to more institutional investors.
The point is that we are kind of working like a startup ourselves, we made a lot of pivots, in terms of our approach and structure, and if you get institutional funders in early they cripple your ability to make these kinds of quick decisions and moves, so it was necessary for us not to take in that kind of money, so we could be flexible to work out the model.
But it is slowly changing because we believe we are proving the concept and we slowly want to take it to the next level, and get verification by getting in bigger VC funds, more institutionalized money, bigger chunks of money, so we don’t have to find so many smaller angels to keep it going.