Software developers at work at iHub offices situated at Bishop Magua Plaza on Ngong Road Nairobi. Savannah Fund and 88mph will also offer mentorship and business incubation support programmes at iHub and Start-up Garage respectively. Photo/File
What you need to know:
Savannah Fund, has set aside Sh840 million ($10 million) as seed capital for early-stage techpreneurs in the mobile and web space, a move expected to cement Kenya’s position as an ICT innovation hub.
88mph, is also targeting Kenyan techies with innovations that can be scaled from ideas to profitable enterprises with its Sh16.8 million ($200,000) fund.
Foreign private equity funds are increasingly paying attention to Kenya’s fledgling ICT sector with two firms already on the ground to tap start-ups.
Savannah Fund, has set aside Sh840 million ($10 million) as seed capital for early-stage techpreneurs in the mobile and web space, a move expected to cement Kenya’s position as an ICT innovation hub.
Another venture capital company, 88mph, is also targeting start-ups with innovations that can be scaled from ideas to profitable enterprises with a minimum fund of Sh16.8 million ($200,000).
The fund managers are eyeing returns from the rapidly expanding communications sector that has seen Kenya emerge as a pacesetter in mobile money technologies and produce winning mobile applications in global competitions.
“We believe there is an outstanding opportunity for commercial mobile and web companies in this market. There is, however, a need for early stage, risk-willing funding and support,” said Nikolai Barnwell, the programme manager at 88mph.
The two seed investment companies say Kenya’s robust ICT infrastructure that boasts skilled personnel, high-speed and affordable Internet services connected to multiple undersea cables and the 74 per cent mobile penetration rate lured them into the market.
“We are backed and supported by both local, regional and international networks of angels, venture capitalists whose expertise we can draw on to help start-ups succeed and scale to fully fledged regional or global companies,” said Mbwana Alliy, managing partner at Savannah Fund, owned by a group of African and American investors.
Mr Alliy, a Tanzanian, has previously worked with global tech firms in the US and UK and is also an international projects manager at a Silicon Valley-based start-up funding firm i/o Ventures.
The Savannah fund is divided into the accelerator and follow-on independent programmes targeting newly conceived and established tech enterprises respectively.
Under the accelerator programme, the fund plans to finance 25 tech start-ups an average of Sh210,000 ($25,000) each in exchange for 15 per cent equity.
The follow-on independent seed funding will inject cash of between Sh8.4 million ($100,000) and Sh42 million ($500,000) to mature businesses in need of liquidity.
Last year, 88mph, invested Sh15.1 million ($180,000) in seven tech innovation ideas such as an online pharmacy Drugs.co.ke that is currently posting a monthly revenue of around Sh2.3 million.
This year, the private venture fund run by an international group of private angel investors plans to support between eight and 12 embryonic tech enterprises with capital injections each of up to Sh2.02 million ($24,000) in return for between six to 18 per cent stake in the holding.
The two firms are eying techies developing solutions in sectors such as mobile commerce and payments, agriculture, education, healthcare, gaming and entertainment, business support apps such as bulk messaging, distribution, warehousing and technical backup applications.
Savannah Fund and 88mph will also offer mentorship and business incubation support programmes at iHub and Start-up Garage respectively.
The venture capitalists will exit the enterprises through offloading to other firms or the public, mergers and acquisitions, after recouping their initial investments and making a profit.
