Investing in Africa

I’m frequently asked ‘why’ I invest in startups focused on Africa, and this post attempts to clearly articulate the reasons this is important to me.

I was born and raised in Mombasa, Kenya and my family has been in here for 5 generations (since the 1850s). I grew up in relative privilege compare to most Kenyans. I remember being about 6 years old sitting in our car when a homeless boy about my age knocked on our window. My father opened the window and handed him some candy, and turned to me and said ‘You are sitting here and that little boy is out there. I hope you appreciate that was luck of the draw and will do something good in your life’. I remember that moment quite clearly even now, over 30 years later.

There are many reasons for my interest in investing in Africa, and I don’t pretend that I invest out of altruism, but I think this is what led to my interest in supporting early stage entrepreneurs on the continent.

I always liked maths and science and studied engineering at university. This experience taught me to approach problems from first principles and think through effective systems. I don’t really have skills that I can directly help people (e.g. a doctor), so I needed to approach the problem space differently. In my early 20s, I realized that entrepreneurship and technology could drive economic development, in a relatively capital efficiency manner. I started building my career in technology, starting at Google in London. After spending time at Index Ventures and learning about venture capital, I realized that, with even small amounts of capital, you could have outsized returns both in terms of value creation and impact.

Technology entrepreneurs create products that improve the effectiveness for people and businesses, and create new jobs with new skills. Given all these benefits I decided to start investing in technology companies in Africa a little over 5 years ago, after ‘learning to invest’ in silicon valley as an angel through my own fund, Musha Ventures starting in 2011. As an inexperienced investor, I tried to maximize learning per dollar invested, as I did not have a lot of capital. I tried to be disciplined by writing investment memos (that no one read), conducting reference checks and completing annual reviews for every company. 

In 2014, there was little capital available for early stage entrepreneurs in Africa and even today in 2020, there is still a deficit of capital available for those who don’t have the right networks. With small investments I am hopeful that I’m able to have an outsized impact on this ecosystem. Even when I don’t invest, I try and give entrepreneurs feedback, be clear on my reasons for passing, or share articles or advice that I think might be valuable to them. 

There have are some early positive signals; my Africa portfolio has rougly doubled in value (on paper), and the companies have created thousands of jobs, enabled new startups to exist, and improved efficiency in archaic supply chains / markets. Despite these early signals, it’s still very early in the life of the venture capital ecosystem in Africa and it’s still unclear if these companies will endure and to have a lasting positive impact on the economic development and people’s lives in the markets. Only time will tell.

My plan, which has remained consistent over the last 5 years, is to continue to think very long term and invest consistently and conservatively in early stage (mostly B2B) technology businesses in Africa and support entrepreneurs doing the hard work along the way. 

Guide to climbing Mt. Kilimanjaro

Summit Day

In January 2018, my wife Tej and I climbed Mount Kilimanjaro. It’s something I’ve been wanting to do since I was a kid (at least since my mum climbed it when I was 16) and I’m really happy I was finally able to make it up the mountain.  Kilimanjaro is the largest free-standing mountain (not surrounded by a range) in the world and the tallest peak in Africa. Uhuru peak, the summit, is very high at 19,000 feet / 5900m.

I’m writing this to document my own experience and make it easy to share with friends. I’ve already shared some of my research with at least 3 people who’ve ended up doing a similar trip and all had a great experience.

Preparation

In preparation for the trip, the most important things to do are to reach a base level of physical fitness and to get good gear. The weather can be severe and the last thing you want on a tough day is to have the wrong equipment and make your day even harder.

A German guy on the mountain said to me on the mountain:

‘There is no such thing as bad conditions, only bad equipment’

In terms of gear for the trip, I put together this spreadsheet inventory with everything you need for the trip. I would go through it line by line and make sure you bring everything that is a must have. I pulled this gear list together from the following sources:

A couple of high level points:

  • Ski gear: I used my ski gear and it worked out great – merino wool base layers, insulation mid layers and waterproof outer layers are exactly what you need.
  • Snacks: Bring some tasty snacks – e.g. dried mango, nuts, chocolate, energy gels (especially good). As you get higher you will lose your appetite and snacks come in really handy as small energy bombs.
  • Wipes: This is how we ‘showered’ every day before changing and getting in our sleeping bags.
  • Leisure: I’d suggest bring a kindle and some cards to pass the time at camp.

In terms of training, the hike is not super physically challenging so I’d work on your general fitness and walk on a stair master or at incline a few times a week if you’re worried about it.

Operator and route selection

Tour Operator

We considered a number of tour operators including Zara Tours, Monkey Adventures, Popote and Kilimanjaro Brothers. We narrowed it down to Kilimanjaro Brothers and Popote and chose Popote in the end because they were better priced and still seemed to have a first class operation. I highly recommend Popote, they were great and we were really happy with the service they provided.

Tipping

Tipping can be a very stressful time for folks at the end of the trip, but it does not have to be. You build a bond with the people you helped you up the mountain and it’s a nice moment to appreciate them. I made this spreadsheet with the amounts we tipped each person (in 2018) on our trip in case it’s helpful for others. Make sure you bring cash and USD is probably the easiest.

We ended up sponsoring guide training for our ‘waiter’ who is now a guide with Popote as we really liked him and wanted to do something small to help.

Route

We ended up picking the 7 day / 6 night Lemosho route which was wonderful. The other option we considered was the 6 day / 5 night Machame route but ultimately decided to go for the longer more picturesque route to help us get better used to the altitude and increase our chances of summiting. We also figured that 1 day extra was not a big sacrifice given the time and long travel invested into the climb. I would not recommend any longer than 7 days though – by the last day we were pretty excited to get off the mountain.

Time of the year

There are two main seasons for climbing Kilimanjaro. January-March are the ‘warm’ (it was still -15C when we summited) but slightly wetter months and August-October are the colder and dryer months. I don’t think it really matters too much which block you choose.

Climb experience

The climb is a great out and back experience and we really enjoyed spending time with our guides and each other and enjoying the changing terrain as we made it up the mountain. Overall it was easy/moderate difficulty except the ‘Summit Day’ which is challenging.

On ‘Summit Day’, we started the ascent at midnight so it’s dark almost the whole way to the summit which we reached around 630am. It’s a demanding day mentally and physically because of how much you walk (50k steps walked, 3k vertical feet up and 6k feet down), the altitude (dizziness, nausea) and the cold (-15C and windy). Both Tej and I had moments where we felt like we would not make it but we helped each other through it – most of the actual difficulty on summit day is mental but you’re rewarded with all the endorphins when you make it to the top.

Here are some photos of our trip:

Day 1: On the way to the start of the climb with our crew
Day 3: Lava Tower (altitude acclimatization)
Day 4: Climbing the Great Barranco,Wall
Day 5: Our tent in Barafu Camp just before the summit day
Cheesy Summit Day Photo – a must!

Investor updates for startups

I’ve invested in about 30 companies over the last 6 years and received a lot of different investor updates. Some companies send few, sporadic (often too detailed), updates whereas others send updates with a fixed structure and on a predictable schedule.

I think the sweet spot for many micro vcs with a portfolio is quarterly updates which arrive on a predictable schedule – e.g. 2 Mondays after the end of Quarter. Founders who update investors on a predictable schedule generally build better companies, in my experience, as there is a correlation with discipline and organization.

Here is my suggested template for sending updates, although this is not meant to be prescriptive and more to summarize the bases covered:

Many startups often miss the ‘Metrics’ section and I think this is the area where most could benefit for improving their reporting.

Template (Quarterly)

Summary

  • Key milestones hit/missed
  • Important takeaways

Highlights

  • Limit to <5 bullet points
  • New customers, product wins, critical hires, geographical expansion

Lowlights

  • Limit to <5 bullet points
  • Lost customers, product failures, lost employees

Metrics

  • Consumer: DAU/MAU, Revenue, Retention/Churn Metric, Employees, Cash, and Burn Rate
  • Enterprise: # of customers, Revenue, New customers, Sales pipeline, Employees, Cash and Burn Rate
  • I recommend showing the same metrics in a table Quarterly and then highlighting YoY and QoQ growth

Product

  • New features or products shipped and a short summary of their impact / future impact

Team

  • New hires / team changes

Other

  • Anything that is not covered by the sections above e.g. Press coverage

Fundraising

  • If fundraising add this section to show progress / any key milestones
  • Also useful for converting existing investors for additional funding

Help

  • Specific intros to investors or potential customers generally yield the best results

I know some founders feel like these updates don’t do noticed but I read every single once of the updates I get from founders, even when I don’t reply.

Changing my industry

I left my job at Pocket Gems in 2015 to figure out what I should do next with my life. I had always wanted to work on technology in emerging markets (particularly sub-saharan Africa) and did not really know the best way to start doing that. I’m Kenyan, born in Mombasa, but have spent the majority of my adult life in the UK and USA. I decided to move to Kenya temporarily to figure out the best way for me to work on emerging market problems. 

I met over 50 startups, investors and technologists, spent a few months working at M-Kopa and learned a lot from my time in Nairobi.  I realised how much my eyes opened up by just spending time physically in the country and interacting with like-minded people on a day to day basis. I spent around a year learning, thinking and considering what to do next and it was one of the most rewarding years I’ve had in a long time. 

I ultimately decided to work at Segovia Technology, based out of NYC, which is a financial services company focused on sub-saharan Africa. I chose to do this over moving back to Kenya for a variety of personal and professional reasons and I’m excited for this next phase of my career. 

Segovia has a mission that appeals to me (using technology to aid poverty alleviation), has an excellent team who is hungry and focused on succeeding, and is primarily focused on Africa. In the best case, we will be able to reach hundreds of millions of people and in our fail case we help a few thousand people receive aid. 

I’d like to spend the next phase of my career building products for sub-saharan Africa and supporting amazing entrepreneurs who are focused on the region through angel investing (e.g. OKHI, M-Kopa, BRCK). I feel like technology is the path to economic development and poverty alleviation in countries like Kenya and I’m excited to be a part of the journey.

Kenya – Silicon Safari

San Francisco has Silicon Valley, New York has Silicon Alley, London has Silicon Round and Tel-Aviv has Silicon Wadi. I think Kenya could have Silicon Safari*, and I’d love to be part of making that happen.

I never really thought I would go back to Kenya, but when I was back home this summer I had a strong feeling that it could be the forefront of innovation and entrepreneurship in Africa.

A little about where Kenya is today…
Kenya has about 30M people and a GDP per capita of $1,600 ppp Kenya is a leader in mobile innovation in the developing world. Kenya currently has a mobile penetration rate of ~ 50% and is forecasted to hit 90%+ by 2013. M-Pesa (mobile-to-mobile money transfer through text) was created here by Safaricom (part owned by Vodafone) and now almost $30M are transacted every day. This model has been replicated in many emerging markets which look to Kenya as a leader in emerging mobile products – particularly in banking and payments.

In October 2010, Barclays started offering M-Pesa to it’s clients and we are not far from a place where mobile phone ‘bank accounts’ can offer most services provided by traditional banks which have a far lower penetration rate than mobile phones in Kenya. In September 2010, a major carrier (Zain) cut all call costs by 75% and all the other major carriers followed suit. With infrastructure capital costs already paid off, the market is highly competitive and consumers are getting excellent quality of service at constantly decreasing prices.

I’m not the only one who sees potential in Kenya… 
(work in progress)
  • Techcrunch, Sarah Lacy in particular, did a piece in August 2010 about the possibilities of mobile in Kenya 
  • Google opened their first non-sales office in Kenya in 2007 and is tasked with figuring out their entire Africa strategy
The Entrepreneurial Ecosystem is underdeveloped…
  • Talent – Classic brain drain coupled with an underdeveloped local education system particularly in for technical talent is a HUGE issue. 
  • Capital – There is little capital for early stage ventures and few investors on the ground who have the appetite and expertise to invest in entrepreneurs. The path to exit is also unclear with underdeveloped capital markets and low M&A volume.
  • Community – We need to build a community for entrepreneurs and investors to find each other and share ideas and best practices. This is starting with initiatives like vc4africa, and Nairobi’s IHub but these are still in their very early stages
What I’m hoping to do…
I moved to Silicon Valley to see how the most sophisticated entrepreneurial ecosystem in the world works. I am about to start working for an early stage start up, and am going to try and be as involved in the start-up community as possible. I want to learn as much as I can so when I do go home, I know what could be possible for Kenya.

I don’t know exactly what I’m going to do or how I’m going to do it when I do return to Kenya, but what I do know is that I want to build technology businesses as both an entrepreneur and an investor (maybe some sort of hybrid incubation model would work best). The country needs pioneers for the field and I hope to be one of the people to build the bricks of the entrepreneurial ecosystem.

* Silicon Safari is a term that I made up! Hope it catches on 🙂 Silicon Savannah was something else I was toying with..