Tanzania Daily News (Dar es Salaam)

26 June 2012

Africa: Venture Capital Investments in Dar es Salaam

Photo: The East African
The government will soon start building a Silicon Valley Environment to enhance education and information technology.

opinion

Mbwana Alliy is passionate about product development and launching new ventures in technology. He is an experienced development manager in consumer web, enterprise software and service. He is a Tanzanian who has lived and worked in three continents - the Americas, Europe and Africa.

The first time I met him was when the Commission for Science and Technology (COSTECH) hosted venture capitalists from Silicon Valley. Currently at I/O ventures, an early stage mentor accelerator programme driven investment firm in Silicon Valley incubating startups with global reach, he recently partnered with two colleagues for a new USD 10m (about 16bn/-) seed capital fund committed to finding and investing in Tanzania, Kenya, Uganda, Rwanda and Burundi that was launched last week.

Called Savannah Fund, it's an accelerator fund, which aims to find and invest in early stage, high growth web and mobile start-ups addressing the Sub-Saharan Africa market. "The new fund will typically make investments in the region of $25,000 to $500,000, "he told Daily News over the weekend.

"The idea is to bring the Silicon Valley-style accelerator model to Africa, seeing what needs to be tweaked to make it work for our region. "It's a small fund at $10m, with most of the activity focused on classes of five start-ups at a time being brought on board and invested in. They'll get $25,000 for 15 per-cent equity, and have 3-6 months to prove themselves,"he said He added that those who fail either pivot or leave, those who gain traction have a chance for follow-on funding.

"A portion of the fund will be invested at the $100-200k range where we'll look at follow-on funding for the startups in our programme and also at other high-growth tech companies in the region,"said Mbwana The companies interested, he said, should be focused on building regional and continent wide ICT business (web or mobile space) at least across East Africa and for those early stage start-ups who want to be in the accelerator, be prepared to move to Nairobi.

"Tanzanians should be aware that they live in East Africa and should take advantage of the union to target their start-ups to serve the whole market. Kenyans do it- so should Tanzanian and Rwandans." he said. Tanzanians, he said, should not only focus on the local market and but take advantage of the larger union.

"Web and mobile is a global business so they should be prepared to rise to the challenge. Savannah fund won't fund Tanzanian start-ups focused only on Tanzania." he said. East Africa has a new tech startup accelerator fund and it's getting international attention. The fund plans to have several components. It will run an incubator like i/o in San Francisco, where ten companies a year get basic funding and hands on mentoring to build a product.

That'll take up about $1 million per year. Another $3 million will go towards follow on investments in the ones that survive. Another $3 million will go towards more mature startups that haven't gone through the accelerator, hopefully from East Africa more broadly. That will leave another $3 million or so for reserves. The partners are confident that more multinationals will start doing acquisitions in Africa as the IPO market continues to grow.

Aside from that, there are rafts of private equity players looking for profitable tech companies to invest in. According to him, the "idea is to bring the Silicon Valley-style accelerator model to Africa, seeing what needs to be tweaked to make it work for our region". At present the fund has about US$10-million at its disposal with classes of five startups at a time being brought on board and invested in.

Each startup will get a US$25 000 cash injection, in return for 15 percent equity and between three and six months to prove themselves. A portion of the fund will be invested at the US$100 000-200 000 range for follow-on funding for the startups in the programme, and also at other high-growth tech companies in the region.

Mbwana says the thing that makes Savannah special is that it's "a fund for entrepreneurs by entrepreneurs". The fund has caught the attention of a number of US-based investors including Yelp co-founder Russ Simmons, Tim Draper, Dave McClure, and Roger Dickey and Dali Kilani of Zynga.

It's also been mentioned on TechCrunch. The fund is just the latest in a series of initiatives aimed at boosting the continents startup scene. Others include Nigeria's Enspire, Ghana's MEST, the Google-sponsored Umbono in South Africa, and Tarhir in Egypt.

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