Starting a business in Kenya:Village Capital applications are due July 5th

Guest entry by Jesper Hornberg, speaking of the challenges of starting a tech business in Kenya.

It is a well established fact among people with an entrepreneurial streak that starting a business in a developing market holds enormous possibilities. As soon as you start it up, you realize that it also holds enormous challenges. These challenges can be overcome though. All you need is a systematic approach, persistence and decent brains. I’ve done this a few times now, for myself, and for other companies, and I can safely say that you have to use exactly the same approach in a developing country as you do in the UK, Switzerland or Ukraine. This entry lists a few of the things to keep in mind, and it also addresses the specific challenge many start-ups face, namely that of finding the right investors.

Idea

This is the starting point for most people, especially for tech solutions. You need to get it right, but you won’t until you test it, and you allow peers and external people to review it. In my view there is an abundance of good ideas out there, so there is no need to sweat this too much. Bigger challenges lie elsewhere.

Team

If you don’t have a strong team, you will fail. No beating around the bush about that. The team doesn’t have to be right form the start, but you need a plan for how to get it right, through recruitment and training, and you will need to be open to change. Pixar once delayed, at great cost, the movie Mosters Inc. because they didn’t have the best team working on it. They only had a mediocre team available, and that was not good enough. You should do the same. Dare to take hard decisions, and make a plan for how to deal with issues like this.

Market

Evaluate your market with both your emotional glasses on, and your analytical glasses on. It is not enough to say that the African FMCG market will double in 10 years. That is cool, but not specific. How does that relate to your idea, and method of sales?

More, what is missing in the market place? What are the substitutes? Would people actually buy your product / service? For real? What are they prepared to pay? How many would be prepared to do that?

Sales and marketing

Do not underestimate this. Again, if you fail here, and 95% of tech companies in developing markets struggle with this, you will fail totally. Work on the margins, don’t let go too much of control to distributors (or whatever channels you have). Make sure you have a strong network on the ground. Be present. Do not outsource control. Remember that Sales is the blood of you business. 

Distribution

You have a lot to choose form here. Make sure you balance your need for control, liquidity constraints, underage and overage costs, security, and margins. Few franchising models work, but there are a few shining exceptions (OriFlame is like a pyramid scheme, but the pyramid is built on the ability to push risk (hence also control) to franchise ladies). Building your own distribution gives control (or the illusion thereof) but will put a big hole in your treasure. There might not be companies present that do distribution, so your options will be limited. Be smart about it. Be prepared for hard decisions.

For a tech company, you need to make sure you have enough eye balls, and that this results in something good for you. Work on your model until it makes sense. Try it out on focus groups. Speak to peers you trust (or people like me that you trust) to get their thoughts. 

Implementation

By far the most important ingredient, it should be what everything else rests on, is implementation. You need a plan, you need flexibility, you need a team with a very good aim at the end goal, you need to be really curious, you need stamina, and you need people that love you, and that are prepared to pick up the pieces of your exhausted soul once in a while.

Politics

My very strong recommendation is to stay away from politicians. It is more than a recommendation. I have seen too many honest and dishonest business people lose everything in such a process. I have never heard of anyone gaining from it in an honest fashion. In short: “There are no free lunches”.

Corruption

Stay away from it. Three reasons that are valid exclusively. First, it is wrong, impure (disgusting even), and it keeps great countries in a trap of corruption and poverty. Where corruption reigns, people will never be equal. Second, it will bite you in the ass, very hard. It is a very costly way of doing things. Once identified as a milking cow, always a milking cow. Third, you can be very successful without engaging in it, and you can use your brain power to develop you business instead of covering up (which it will invariably come to).

Investment

There is plenty of money in the market. Entrepreneurs complain about a lack of it, and from experience I know this is true everywhere you go, with the possible exception of San Fransisco certain times of the year. To get the funding, you need to be investment ready, and you need to be prepared that investors will want something in return (like equity). Don’t be put of by that. Instead, get advice and support on how to take it forward. If you are coming in from Europe, you will probably be eligible for some sort of support or guarantee from your government. If you are local, look around at places like Village Capital, Greener Hill (that would be my set-up), Savannah, 88mph, Growth Africa or some other incubator or resource center to see what they offer.

If you have confidence that I can help you, direct you or put you in contact with the right people, please get in touch. If not, approach someone else in the same industry.

Many start-ups find that the first bit of financing is the most difficult one. Village Capital, which I happen to be the Nairobi Program Manager for, is currently running a competition in Nairobi. It is hosted by the newly established GrowthAfrica, another incubator space.

For convenience’s sake, I paste a summary of this below. Deadline is approaching so please be quick!

Village Capital

“Do you have a start-up with an innovative product or service that can create growth in Kenya, Africa and possibly the whole wide world? Then you should consider applying to Village Capital!

Village Capital Nairobi is a 20 week program that runs from August - November 2012 for Kenya’s most promising  and  innovative  entrepreneurs in the fields of mobile & web, green tech and essential services (education, health & water/sanitation). As a participant you will join a group of like minded peers, receive coaching on how to accelerate the growth of your company and network with strategic partners and investors who can scale your venture. At the end of the program, two start-ups will receive USD 50,000 investment (as convertibles) each with a twist: the entrepreneurs will decide who among the participating start-ups will get the pre-committed  capital.      

The program is hosted by GrowthAfrica, and comprises of 6 three-day workshops which will focus on key areas of enhancing your business. Subsequent to each   workshop, identified improvements will be implemented with the support from a carefully selected group of experienced mentors.”

A programme participation fee of KES 40 000 will give you access to training materials and key business tools as well as food, drinks and refreshments during the 6 workshops. The program will also grant you access  to:  

- Multiple public events that will give you a forum to promote your venture and gain support  

- A place in the Village Capital global network, which has run 14 programs in eight   cities to date worldwide (San Francisco, Mumbai, London, New Orleans, Sao Paulo,   Boulder, Atlanta & Shanghai) and led to over USD 10 million investment in over 150 companies  

- Opportunity to pitch your company to a group of investors from the US, Denmark and Kenya, who will be available at special DEMO days  

Applications are due July 5^th on www.thegrowthhub.com/vilcap.”