Monthly Archives: June 2010

Venture Capital in Nairobi – VC101

A talk on venture capital (VC) was given by Vincent Kouwenhoven and Brian Hirman of the eVA (eVentures Africa Fund BV) at the iHub in Nairobi. They both have about 15 years experience in VC and enumerated the criteria the fund uses for investments including that target companies in Africa should have profitable track records (not start-up’s) to qualify for VC investments of between 25,000 and 250,000 Euros (~Kshs 2.5 million to Kshs 25 million).

The fund was launched in January 2010, and in the ½ year they have invested in 5-6 companies. The founders are seasoned travelers in Africa and their interest was piqued by observations they made over the last three years including;
1. Chinese investment interest in Ghana and Kenya
2. Arrival of fibre optic cables
3. More African returnees returning from the Diaspora who were setting up their own companies (it’s a good sign). They have been exposed to Kenya for many years and sense that entreprenual spirit in Nairobi is very good as are competence levels in high technology sectors.

– All their investment are active in the digital scene – whether mobile, internet, communication platforms – and include a leading internet company in Ghana, while in Kenya, they have Jumuika, Ratio Magazine, and the latest deal signed today is for an investment in Verviant (w/ Liko Agosta better known for Pesapal)

– They invest growth funding in companies and try and cultivate a healthy portfolio, unlike other VC’s who make several weak investments in the hope that one or two will payoff and offset the failures. Their investment clearly spells out the use of proceeds/funds which can vary, but ideally should not be for increased salaries or other debt repayment (unless to retire expensive debt). They also mentioned that their investment criteria is a guide, not cast in stone (e.g. Jumuika was a startup)

– They get involved in the operations of the company; whether marketing, technology, financial, entrepreneurship, HR policies. They act as a sounding board and advise owners (use skype a lot) on how to scale up e.g. when they get traction, how to set up customer care capacity

– They seek out committed entrepreneurs – not part timers, or people with one good idea they have not developed, or people with a dozen ideas (not focused). They want to invest in people with the gut and belief to start a business and are willing to eat bread & water to hack it put (not one who relies luck) – and who also enjoy what they are doing. Other “no no’s” include people who ask for too much money that dilutes their equity (EVA want founders to retain at least 51% at all timea), or which enables them to run the business without risk for two years (i.e. with the VC’s funding)

– On exit strategy their preferred rout is a buyout of the company within 3 to 7 years by multi-national or larger company. In cases where an investor may not be ready to sell, the VC can sell their stake to another VC.

VC Coffee Chat

On Monday June 28 at the iHub in Nairobi there will be a talk on venture capital, in continuation of a series of events that bring together local financiers and entrepreneurs.

In preparation for that, we had a chat with Eline Blaauboer of TBL Mirror Fund which is a Dutch venture capital fund that has made four investments in Kenya and are also branching around East Africa.

The Fund invests a minimum of EUR 100,000(~Kshs 10 million) taking minority stakes in companies that show fast growth and the potential to be market leaders. They look for well-managed ambitious and visionary SME’s and TBL invests in all sectors particularly where the partners have extensive industry knowledge, as a VC focused on a specific sector is not sustainable here yet. It’s interesting to note that, while it is said in local banking that women are not ambitious enough to dream big and attract large funding, ½ of their investee are women-led companies

Related
– TBN are hiring both an investment manager and an investment analyst.
– On Monday June 28 at the iHub in Nairobi there will be a VC 101 event with a talk on venture capital given by Vincent Kouwenhoven of the EVA Fund
– Recap of recent VC activity in the region by Ratio-Magazine.

Urban Inflation Index June 2010

Tracking changes from three months ago Mar’ 10 and one year ago – Jun’ 09

The World Cup is on going in South Africa and helpful guides for price comparison have been provided for comparison. Also the Kenya budget speech for 2010-2011 was read by Uhuru Kenyatta the Finance Minister and has been trumpeted as a trillion shilling budget despite a deficit of resources.

In reaction to some changes noted here, Kenya’s Parliament on June passed a price control bill that seeks to regulate the retail price of among other things – maize flour, sugar, rice, wheat flour, kerosene, diesel, petrol, and cooking fat.

Gotten Cheaper
Staple Food: Maize flour, which is used to make Ugali that is eaten by a majority of Kenyans daily. A 2 kg. Unga pack at Uchumi today costs Kshs. 71, which is 15% cheaper than Kshs 84 in March and 92 a year ago [a 2.5kg pack in South Africa is ~kshs. 111]

About the same
Communications: priceshave remained about the same despite it being an eventful few weeks;
– Safaricom had another exemplary year of profits and performance – returning a turnover of $1.05 billion (Kshs 84 billion) and will pay their shareholders dividend of $100 million (Kshs 8 billion). They are the exception in the sector where their rivals loss making – Zain (Africa) was acquired by Bharti Airtel and will undergo its fourth brand change in eight years, while Orange averted a messy divorce with the Kenya Government by way of a sweetheart deal that may shake up the sector. They and newcomer Yu will all benefit from a government decision to lower the cost of a 3G communications license from $25 million to $10 million.
– Communications costs remain about the same for voice and SMS (who can keep up with Yu and Zain’s promotions) and the big push has been in the area of data. Safaricom latest push is for 10MB for 8 shillings ($0.10) and continues a recent trend that pushes down the cost of data with cheaper phones (Nokia E63 is now 15,000 (about $187 down) from 23,500 a year ago) and hardware, financing (Loans for laptops).
– Unfortunately Safaricom has rubbed some local developers the wrong way entering into a Mxit partnership and again with an innovation forum that has caused some controversy.

Utilities – Electricity: Latest bill is Kshs 1450 ($18) which is down from 1,700 (~$22) in March and about the same as 1,550 a year ago. Heavy rains at the end of the last quarter have seen Kenya dams fill and a power generation shift from diesel back to hydro – the Government says this will result in reduced power bills at the end of the year, but the rains have slackened of late. In the bill, consumption is kshs 500 with a fuel levy cost of 400, while a year ago consumption was also 600 with fuel levy cost of 500

Other food item: Sugar (2 kg. Mumias pack) is at 200, and no change in the last few month. COMESA liberalization is set to happen in 2011, and is expected to expose the market to unrestricted imports from the region, bring down the retail price of sugar in urban areas, but leaving sugar farmers from western Kenya with high input costs at a disadvantage. The middlemen men still run this sector and around the period of Uhuru’s budget speech was being read, there was no sugar (from any company) on the shelves at Uchumi. [2.5kg in SA is Kshs 191].

More Expensive
Beer/Entertainment: A bottle of Tusker beer (at local pub) is Kshs. 160 ($2) most up from 150 in March at most places I know and 130 from a year ago. There was an immediate price hike effected by dominant brewer East African Breweries (EABL) when the Minister read his speech in early June; however some bar owners complain that this should have computed at 5 shillings per bottle (beer retails in ½ litre), but EABL passed on an additional 5 shilling increase to customers under cover of the tax hike. The price of coca cola has also gone up as the excise tax on carbonated soft drinks, wines and spirits was also pushed up 8%.

Fuel: A Litre of petrol fuel (at local petrol station) is now Kshs 90.9 per litre (~$5.1 per gallon) , 7% up compared to Kshs 84.9 in March and 25% higher than it was (72.5) in June 2009.

Foreign Exchange: 1 US$ equals Kshs 80.6 compared to Kshs. 76.6 in March and 77.94 a year ago as the Kenya government has indicated that it will not (can it afford to) intervene to support the shillings from sliding.

Money Transfer across Africa

From focusing on money transfers in Kenya, where there has been a lot of development and competition especially in the area of mobile money transfers, it now moves on to what about across Africa? From country to country?

Today in Nairobi Ecobank formally launched their Rapidtransfer which was rolled out in October 2009 and is now available in Kenya. With Rapidtransfer one can send money to families members e.g. school fees, pay for goods, send cash to another account in another country, and have the funds available instantly in local currency

An illustration used was for how one can now transfer money from Mombasa Kenya to Dakar Senegal – and with Rapidtransfer, an individual can send a maximum of $10,000 per day (~Kshs 800,000)between the two points on opposite sides of the continent instantly! It is also open to non-account holders and can be used for intra-country transfers as well. The product works only within the Ecobank network, which now covers about 30 countries. They get around the foreign currency restrictions in some countries by making and receiving payments in local currency (no forex exposure to customers) and all at a competitive rate compared to Western Union or Moneygram.

Rapidtransfer was launched by Kenya’s Central Bank Governor who chided the media for wanting too much from the product already. On whether Rapidtransfer will be on mobile phones, he gave tales about trying to buy a car in 1992 when money would take a week to be transferred from a Nairobi account to a Mombasa account (it was then faster to send money hidden in an Akamba Bus package) and this was also at a time when branches were not linked and one could only transact at a particular branch.

Rapidtransfer is unique in that many because banks don’t talk to each other across borders e.g. a bank in Kenya and a bank in Uganda may share the same parent or name but customers who cross borders are not able to transact (except using visa). However, Ecobank customers are also able to use their ATM bank card in all the 30 countries they are present to fully transact across borders.

edit February 2023.

Swift River 101

On June 16 at the iHub in Nairobi, a talk was given by Jon Gosier the director of Swift River which I first heard of Swift River following its use with Ushahidi following the Haiti earthquake early in 2010 when crisis rescue & response teams faced a challenges of processing 200,000 SMS messages a day. So the question was how do you filter that information to get help to the people (i.e. earthquake victim) who need it?

Jon said Swift River is an open source platform that uses algorithms and crowd sourcing to filter and validate information. He gave a quote from the book the ‘The Long Tail about with such vast amounts of data in the world, there is need for filters to filter. Swift River helps by pulling out data and he mentioned some of the tools used. In his guide titled Swift River in plain English Jon lists the arms of Swift River which include:

• SiLCC pulls keywords from any Text (including SMS and Twitter) and automatically sorts related text ( a natural language processor)
• SULSa automatically detects location of incoming content/reports
• SiCDS automatically filters out duplicate content (re-tweets, blogs, text messages)
• Reverberations detects how influential/popular content is online
• RiverID allows Swift users to carry their Swift score and reputation with them across the web

All these enable an organization facing a challenge of too much data to among other things, pick out what’s important, save time, suppress noise, filter & curate the information. This is more so at time of urgency or crisis

Swift River can also be used by newsroom to manage & curate very large information in a crisis, for online brand monitoring, or for election monitoring. It runs on a free and open source platform. It’s still in development, with more features & improvements being added to the beta (now at Version 0.2.1 Batuque) over the rest of the year by the development team who are based in Uganda.