I was genuinely excited to read a number of
weeks ago about the launch of the Savannah Fund in Nairobi. This US$10 million incubator and
accelerator has been established purely to invest in digital and mobile
initiatives in Sub-Saharan Africa. Once they raise the capital, they will use
the funds to provide mentoring to start-ups, provide follow on investment to
those that graduate from the incubator, and then also invest in more mature
businesses in the region. Nairobi has been selected as the location for the
fund, which makes a lot of sense given the focus and energy that is being
generated from the success of M-Pesa and associated businesses. The efforts by Eric Hersman of iHub fame
and his partners to generate interest and investment in East Africa technology
projects should be widely acknowledged.
What is interesting has
been the attention that has emanated from this announcement on the venture
capital, accelerator and incubation industry in emerging markets.
Traditionally, entrepreneurs in markets like the United States tend take the
path of raising initial seed funding from friends and family, before
connecting with incubators or accelerators who may provide early stage funding
and advisory support, often coupled with co-working spaces with other
start-ups. Whilst the product is being built and launched, entrepreneurs will
start the well-worn path to Silicon Valley to pitch for Series A funding. This
model has worked effectively in the United States for many years and while investment
in venture-backed companies only equates to between 0.1 percent and 0.2 percent
of U.S. GDP annually, these companies employ 11 percent of the total U.S.
private sector workforce and generate revenue equal to 21
percent of U.S. GDP. That is quite an impact!
