Noel Daniel is the Co-founder and Managing Partner of Kudu Ventures, the first Ethiopian Venture Capital Firm in the nation. Noel is on a drive to motivate and invest in young entrepreneurs. The Ethiopian - American / German entrepreneur spoke to The Reporters Samuel Getachew on his venture capital, on the recent investment he made through iCog, known for its work on Artificial Intelligence and reflects on how Ethiopia can begin to attract Venture Capital investments. Excerpts:
Tell me about Kudu Ventures?
Thank you for the opportunity to share about our exciting journey! Kudu Ventures is an early/growth stage impact venture capital firm that invests in innovative start-ups, ideas and founders that are aiming to solve our continent's most pressing issues.
We launched earlier this year with a committed capital of over 100 Million Birr from my partner/investor, Mike Abebe who is based in the United States while I recently moved to Ethiopia from New York to set up our firm. As an impact-fund, we focus on sustainable and socially inclusive start-ups that have a positive impact on our communities and empower the less fortunate.
Through Kudu, you recently made a local investment worth five million birr in Ethiopia with iCog's - "SolveIT Accelerator". Tell me about that?
"SolveIT Accelerator" will launch this September with 18 innovative tech start-ups which are going to receive seed money, training and connections to bring their ideas to life.
It is also our first investment and we are excited to partner with iCog Labs for this new initiative. The SolveIT Nationwide Innovation Competition was started last year by iCog Labs, US Embassy and JICA in 15 cities across Ethiopia with the idea of decentralizing innovation across the country and encouraging young bright minds to come up with local tech-based solutions to local problems.
In this year's competition around 288 start-ups competed from which 63 start-ups will be pitching their ideas to us at the Grand Finale, happening on August 17th in Addis Ababa. The 18 most promising ideas then will be chosen to join our new "SolveIT Accelerator" which we expect to be the most comprehensive and impactful accelerator in the country.
iCog has proven for the last six years to be a pioneer in the field of Artificial Intelligence in Ethiopia and East Africa. Besides providing AI tools for companies outside of the continent the company has a huge focus on building human capital in the country, which perfectly aligns with our vision and purpose.
With projects such as iCog Makers, Anyone Can Code and Solve IT, they have impacted tons of children and young innovators. In addition, Betelhem Dessie, Ethiopia's youngest tech pioneer will be leading the "SolveIT Accelerator". She is the perfect representation of what young minds can achieve if provided with the right resources, connections and mentorship.
Upon announcing the new investment, you are reported to have said; your venture capital firm has raised "over 100 million Birr to be invested in different ventures within Ethiopia." What exactly are you looking for when deciding which startups to invest in?
When investing in early stage start-ups there's often very little financial data available because the company probably hasn't entered the market yet. Thus, when we evaluate start-up ideas for a possible investment, qualitative evaluations beat quantitative ones. For this reason, we look at three categories when analyzing innovative ideas - Team, Product/Service & Market.
Team: What are the backgrounds of the founders and how does that equip and set them apart to succeed at this particular idea because if it is a good one, many more companies will join the market to compete. We also prefer to invest 'product first companies' rather than 'company first companies'. A 'product first company' is when founders experience a certain problem and set out the solve it by creating a product/service which leads to the creation of the company where as a 'company first company' is when founders first decide they want to start a business with no product yet. 'Product first companies' really speaks of the organic nature of company formation because the founder saw a real-world problem and sets out to conquer it.
Product: Will this product/service solve a fundamental need in the market and is it scalable beyond Ethiopia? We also look for products that actually make a change and not just a marginal difference. Renowned VC Investor Ben Horowitz uses the difference between an Aspirin and Vitamins to make this point - Vitamins are nice to have, they offer some health benefits but you probably won't interrupt your commute halfway to return home for the Vitamin you forgot to take. If you have a headache though, you'll do just about anything to get an aspirin. We want to fund "Aspirins".
Market: How big is the size of the market opportunity the start-ups founders are trying to pursue? Big markets are often needed for companies to successfully scale. In Ethiopia, we have over 100 million people (compared to Kenya's population of 50 million - yet they are still more advanced), which means there's a large market that can be tapped into with the right business idea. Especially now, with Ethiopian Telecom opening up for privatization, we hope that Internet service will become cheaper, efficient and more reliable which will lead to a bigger mobile user market.
As you may know, Ethiopia is attempting to be a society of venture capital investment. What do you think needs to be changed and reformed to allow such investments to flourish?
There is a lot that has to be done on the government side for Venture Capital investments to grow within the country. First, there needs to be a proper policy, infrastructure and legal framework (which do not exist at the moment) for us to operate efficiently. Especially since we are the first Ethiopian VC firm, we have the responsibility to inform the greater public about our growing tech ecosystem. We're also constantly encouraging the youth to start thinking outside of the box in order come up with breakthrough ideas for which they can receive funding from Kudu.
Secondly, tax incentives are very important especially for local investors because they only intend to invest in tangible assets such as buildings and factories. It's also important for all of us to understand the importance of being at the forefront of technological advancements in order to become a thriving knowledge-based economy.
Lastly, government stakeholders should ensure that the private sector (practitioners) are involved in the policy creation process, often laws are drafted by academics who have no practical experience in the given sector.
What makes venture capital different than others?
As mentioned earlier, local investors mostly invest in traditional business that are considered 'safe' and have proven again and again to be profitable. Venture Capital investments are high risk - high return due to the early stage nature of the businesses with often no financial track record. On the other hand, if you look at the world wealthiest people, most are start-up founders such as Bill Gates (Microsoft), Mark Zuckerberg (Facebook) and Jeff Bezos (Amazon) who wouldn't have been able to start their businesses if it wasn't for venture capital investments during their early days.
In reflection of your activities within Ethiopia, what is the long-term vision?
The long-term vision for Kudu is to create and support a sustainable tech ecosystem with thriving young startups that are going to change Africa's narrative. We strongly believe that Ethiopia will reach prosperity through innovation and technology. Kudu is highly committed to giving young entrepreneurs the same opportunities people like Bethlehem Dessie and myself were given.
Thus, we aim to invest in over 100 homegrown start-ups and raise another USD 20 million to USD 30 million within the next two years to scale our operations and position ourselves as the leading Venture Capital firm in Ethiopia and beyond. As for myself, being only 23 years old - I hope to be a beacon of hope and motivation for the millions of young people that are growing up in Ethiopia. I want to encourage them to know that anything is possible through hard work, dedication and persistence.
What advice do you have to the future entrepreneurs of Ethiopia?
To all the young brilliant minds that have been eagerly waiting to launch their business idea but couldn't due to lack of financing, Kudu is here to nurture and support you.