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Technology

Irrational capital, the missing first mile of investment

 

In entrepreneurship, it takes one to know one. As we talk-shop at various forums, with government, financial services and even at the burgeoning table of the fabled angel investor, the reality is that there is a huge disconnect in the expectations of capital and available opportunities.

It has been said that there is more than enough capital to go around but that there is a dearth of investable enterprises worthy of even a cursory glance in a world of constant hype and attempts at the next big thing.

As an advisor of the fully committed Safaricom Spark Venture Fund and through my work with DemoAfrica, I have interacted with over three thousand startups at various stages of actualisation.

Talking to entrepreneurs and sifting through pitches and documentation give a real pulse of the working and state of the startup ecosystem and one gets the sense that capital keeps missing the point especially in the early stages.

This has been affirmed in recent work raising a fund to address the needs that have repeatedly surfaced from these interactions. Sitting at the table with advisory groups and funds-of-funds type organisations, it is not long before we hit a wall with many, who while claiming to have an appetite for the emerging market opportunity and the risk carried, especially so by early stage enterprise, are still stuck in their ways and carry a rather taxing checklist suited to an entirely different class of corporate entity.

I feel that understanding what it means to be in the trenches building a company is important for anyone who is actively engaged in building deal pipelines for investment. Issues of culture, personal networks, trust quotients, industry tectonics come into play in ways that a template process – good for factory-styled line - never quite appreciate.

For entrepreneurs this means that even with a clear need to raise capital to hit full potential, the process is seen as tiresome, wrought with asks and demands but very little support. For the owners and minders of capital, it means lost opportunities courtesy of processes that predispose them to ignore worthwhile startups who may end up in the dead pool.

Irrational capital understands that bookkeeping, governance, streamlined daily operations et cetera can be paid for and that the ‘soft issues’ account for a lot more than credit for them and should be where the focus is.

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