Thoughts on investing in African startups

As we approach the Green Pioneer Accelerator Venture Forums at Growth Africa in Nairobi (June 9) and at Impact Amplifier in Cape Town (June 11), we profile Johnni Kjelsgaard, CEO and Founder of GrowthAfrica.

The Green Pioneer Accelerator’s inaugural graduation in Nairobi and Cape Town will showcase 21 entrepreneurs.

Over the past four months, Impact Amplifier, GrowthAfrica, VC4Africa and Hivos offered the Green Pioneer Accelerator programme to selected businesses, taking them from ‘market proof’ to ‘ready for investment’. Read more about the Green Pioneer Accelerator entrepreneurs from Kenya and South Africa.

Johnni Kjelsgaard is the CEO and Founder of GrowthAfrica, one of the Green Pioneer Accelerator partners. He has over 15 years experience as an entrepreneur, mentor, angel investor – most of his professional life he spent in Africa helping entrepreneurs refine ideas, grow start-ups and raise appropriate financing – grants, debt and equity investments. Johnni also sits on the ASPEN Network for Development Entrepreneurs East Africa Chapter steering committee.

Please tell us about the Green Pioneer Accelerator program in Kenya.

“January 2015, the Kenyan group of the 2015 Green Pioneer Accelerator program kicked off with 11 companies on board. Our accelerator programme comprised of six 2-day workshops, mentorship, speaker sessions, and concludes with the upcoming Venture Forum.

In-between workshops entrepreneurs implemented new knowledge, insights and plans they acquired and made during the workshops, from interactions with peers, speakers and experts.

The entrepreneurs got support from a mentor, the GrowthAfrica’s facilitators, dedicated associates and a programmes manager. We attract a phenomenal pool of vertical and horizontal mentors who are experienced entrepreneurs and senior executives, sector or topical experts with a recognised track record, or investors and investment managers of the funds likely to fund the start-ups once they have proven their capacity for growth and success.”

What will happen at the Venture Forums?

“Our venture fair is a bi–annual event where local and international investors including angels, family and corporate foundations, VCs, and impact investors have a chance to interact with our recent graduates and alumni to see if any of these businesses fit their profile. Most interaction however happens one-on-one at each at the stand in the far, where entrepreneurs have a chance to demonstrate and showcase their innovative products and services. The venture forum also acts as a platform for our entrepreneurs to initiate funding and partnership discussions with organizations represented.

The Green Pioneer Accelerator Venture Forums are scheduled for June 9 (Nairobi) and June 11 (Cape Town). Thereafter, our cohort will graduate to a bigger network of GrowthAfrica’s alumni – currently 91 businesses and over 250 entrepreneurs. Graduates from both groups in Kenya and South Africa will have access to over 600 private sector investors and can tap into the combined networks and knowledge of the participating partner organizations – Hivos, GrowthAfrica, VC4Africa and Impact Amplifier.”

What is GrowthAfrica’s methodology?

“GrowthAfrica’s early-stage acceleration programming is second-to-none due to its focus on the specific reality that entrepreneurs in Africa are faced with. Many international programmes fail to recognize and understand the unique challenges the markets, political and socio-cultural landscapes create for social businesses in their infancy and beyond.

The methodology and key tool, the ImpactCompass™, is designed to work best in groups – be that a group of co-founders, a group of peers, or an entrepreneur and his mentor or advisors. From my experience with the last 7 batches of startups, most learning comes from this interaction; the challenges peers provide the sharing of insights and network, and the moral support.”

What was your initial experience in investing in African startups?

“First experience investing in African start-ups was with my own IT-startup back in the 1990s; where we’d invest in/acquire local IT companies as a part of our market entry strategy. The experience was mixed, but most of the bad things related to bad management of expectations and too broad assumptions about the market context and cultural context within which our investments worked, i.e. the fact that many aspects (also non-obvious/non-visible aspects) were very different from my own background from Northern Europe.

This learning curve was steep, but learning that has subsequently been very useful to me as an entrepreneur, investor, adviser and consultant across Africa.”

Were there challenges with the companies you initially invested in?

“Infrastructure has improved greatly over the past two decades – so initially this was a major obstacle, but I’d argue that it is much less so today; at least in an East African context. Respecting that business processes need to be design with the local reality in mind is now an obvious thing, but 15 years ago this was not as obvious. The reality is what it is, and assuming you can change that with the stroke of a pen is naïve.”

Is the external reality for business in Africa conducive?

“Today, I would say it is – the opportunities far outweigh the risk, and the potential return in Africa is enormous!

But you will get nowhere if you do not have a profound understanding of the world you operate in. In as far as the supply of talented young people are concerned, this certainly is also an aspect that has improved vastly over the past two decades; but most young people still need 2-3 years of training out of college or uni before they are productive and valuable members of corporate teams – and many young people think way too highly of themselves as they enter the work life, and thus either miss out on critical learning and experiences, or unnecessarily frustrate their employers and colleagues in the process.”

What advice would you have for global investors coming to Africa to invest here?

“Do not underestimate the value of spending time to understand (deeply!) the reality of the African markets (and their diversity); African societies – unlike most other societies are developing at 2 or 3 different, and often very separate, tempi – so often you need to understand several realities to understand society at large.

Do not underestimate the need to adapt your products and services to meet the needs of customers; or the need to adapt strategies and the operational set-up… African operations, strategies and delivery of value proposition is unique and using lessons from other developing economies needs to be done so very carefully.

Invest early on in local talent – it takes time to build it, but it is the best return on any investment you will make; and don’t assume local talent is cheap, unproductive and efficient.

Talent costs money – also in Africa – but expect excellence and value in return!”

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