For session notes on Challenge Hack 3: New and Better Models for Training Entrepreneurs (Group B), please visit the following links: Challenges, What's Working?, Solutions, and Action Steps. Sean Griffin, the CEO and founder of StartUp Cup, was the facilitator for this session.
GES 2015 in Nairobi
Workshop 1: Protecting Intellectual Capital
Saturday, July 25
Moderator: Antony Cook, Microsoft
Panelists:
- Tamarind Nott, Mbiri Skincare
- Isaac Rutenberg, Center for Intellectual Property and Information Technology Law (CIPIT), Strathmore University Law School
- Ituze Ndutiye Colombe, INCO Icyusa
- Victor Nzomo, Intellectual Property Assets Consulting
Estimated number of attendees: Approximately 20
Discussion:
Terminologies that emerged during discussion:
• Intellectual Property (IP): A registered right over a brand or product
• Intellectual Capital: The value (monetary) of a protected property/product
• Patent: Exclusive right to an innovation/invention/idea
• Copyright: Legal term to define patent
• Trademark: Identity/name/business idea
Emphasis: So many entrepreneurial ideas are emerging throughout the world in the 21st Century. When developing and an idea/product, an entrepreneur needs to take into consideration the following:
• Various national/regional global legal regimes governing the registration and enforcement of compliance with IP rights in frontier markets,
• Understanding the sector so as to know who else has registered a closely related idea/brand/product. A case of the Nairobi Java House was cited when the same name could not be registered in Uganda since a close identity/name already existed.
• Analysis of the cost of protecting the entrepreneurial idea.
• Protection and promotion of the source/raw materials or those involved in the thought process – look at protecting the value-chain.
• Be in control of and/or protect the platform upon which the idea will be promoted. Having a protected domain will save one from penalties on violating various policies governing the use of social media. It may also prevent adversaries and staff from postings that may undermine your product/idea.
Q & A:
Q. Is it worth registering IPs in Africa given weak regulatory frameworks? What are tax implications of doing so?
A. There a few countries in Africa with strong legal regimes in managing IPs. It is important to know and take advantage of existing regional mechanisms that govern IPs in French and English speaking countries in Africa. This would lower the cost of registering IPs in every country and may also assist in ensuring compliance to patents in countries where legal regimes and enforcement are weak. In addition, we need to map IP threats levels and categorize them whether emanating from small vendors or big corporations.
On taxes, entrepreneurs are encouraged to negotiate tax incentives and share with their governments possible benefits when IPs are domiciled in their countries.
Q. How do we ensure the interests of entrepreneurs taken on board when they are involved in the co-design with big corporations?
A. Although business-process patenting is allowed in some legal regimes, it is not easy when big corporations are involved. They tend to focus on product patenting rather than business/ideas/thought-process patenting. Entrepreneurs are encouraged to go beyond ideas when dealing with big companies and negotiate for flexibility from big corporations to ensure acknowledgment and protection of the entire value chain.
Q. How do we protect content -- such are comic/TV stories -- from being developed/produced without consent. How do we ensure copyrights are protected?
A. We need to look at special incentives that may be extended to producers and distributors, while at the same time allowing the product to achieve its objectives. Emphasis should be on acknowledgement of the author of the script, when and for what purpose. This would make the producers and distributors more receptive and share the proceeds since their value-addition is also recognized.
GES 2015 in Nairobi
Conversation 11: Inspiring the Next Generation of Agricultural Entrepreneur
Sunday, July 26, 2015
Moderator: Don Gips, Blackstone
Panelists:
- Alloysius Attah, Farmerline
- Solomon Asamoah, African Development Bank
- Eric Muthomi, Stawi Foods and Fruits
- Rohit Singh, Equity Bank
- Agnes Klibata, president of AGRA
Estimate the number of people in the room: Approximately 35-40
Introduction:
Agriculture is the heart of Kenya GDP growth. Why does agriculture lag behind?
Value added sector challenges, how do we overcome?
Is there a skills gap on production or business side?
What are we doing to support women from subsistence farming to businesses, especially with lack of ability to get capital?
What can government do and not do?
Agnes: Real optimism for agriculture, with increasing needs to invest in enablers, ability for governments to listen to private sector and civil society
What will agriculture look like in the future, with population growing and land being subdivided? Can indigenous solutions in the farming sector be banked?
Solomon: Real impediment is the infrastructure, there is where we focus and then PS and entrepreneurs will come along and can solve the rest. Land will not be the constraint.
Agnes: We need more agribusiness, and less people on the land to make it more productive, need more businesses
How to better transfer knowledge to farmer, i.e. organic farming. Agribusiness hubs: soil testing, farmer aggregation. What are other challenges that agribusiness entrepreneurs are facing?
GES 2015 in Nairobi
Challenge Hack 2: Solving One of the 8 Challenges of High Impact Entrepreneurship
Sunday, July 26, 2015
Estimated number of participants: 55 people
Overall challenges and barriers to scaling:
Addressing cultural challenges/ barriers (such as traditions, language, and religion):
Solutions/ Opportunities:
How to execute an idea:
Where does an idea come from?:
GES 2015 in Nairobi
Conversation 5: Focus on Africa: Different Business Models
Saturday, July 25, 2015
Moderator: Deborah Magid, IBM Ventures
Panelists:
1. David Kamau Kuria, CEO, Ecotact
2. George Mulamula, CEO, DTBI Incubator
3. Harry Hare, DEMO Africa
4. Danta Disparte, Risk Cooperative
5. Tayo Akinyemi, AfriLabs
Approximate number of attendees: 80
Main ideas:
- No one knows what you are doing no one will buy it. Test the hypothesis. This will give you exposure and a chance to correct things early.
- “Speed to market” and then understand if the idea will work.
Danta:
• Be ready to run a business for life, not just for 3-5 years.
• Copy cat system doesn't always work without full information.
• Start on a business, get it to work well then diversify, not too early though.
• In Africa, start ups that struggle with financing can benefit from public private partnerships.
George: Where can start ups begin? Consider the big opportunities available within global companies by working in their supply systems, e.g IBM: package the solutions and they will be interested.
Danta:
• For global companies, it’s important to note that staying on the sidelines and not investing in sub-Saharan Africa is a mistake. It is the next big place, with fast growing economies.
• Start ups need - investment, someone to buy their product and marketing opportunities
Harry: One consideration is social investment financing.
Kamau: Won Social investment of the Year Award
• Turn challenges to opportunities. How do we bring some of the solutions for the village, e.g sanitation, and translate them to entrepreneurship? In sub Saharan Africa, social investment faces complex ecosystems such as adequate legislation to support innovation.
• Secondly financing for social development (sanitation, solar) was not attractive to financial institutions in the past. Now there is more interest from banks.
• More than 50 percent of sub Saharan Africa will be living in urban settlements in the next 50 years. From this, consider the opportunities that could emerge (waste collection) for innovation and investment through technology.
Harry:
• Initially looked for venture capitalists. After three years without success, we turned to 'angel’ investors. There is now an African Super Angels network comprised of NGOs and other groups that can provide financing for start ups.
• Incubators such as iHub offer training to help start ups understand the size of the market and where they fit. Are you local, regional? Where you intend to be will determine the type of financing and where to look for it. Is your business competitive so that it will attract financing?
• Incubation hubs in Kenya have their own challenges. In time, they will need to develop more deliberate processes to systematically build entrepreneurs. Often they have short programs, e.g 1-2 weeks, which may not be adequate. Then they cover a wide scope of components, such as what to do initially, at growth and when and how to expand. Perhaps these areas could be divided out along core competencies so that each one has its niche.
• Incubation helps entrepreneurs to consider questions like - How do you innovate a business model to fit into a certain setting and get it to grow? Identifying a gap, aligning consumption of the product to the market.
• Entrepreneurs fall into two categories, survival and business. The difference between the two is that the latter incorporates "innovation," which gives an advantage to their product or service.
• Entrepreneurs don't need to solve big global problems. Consider the idea in small steps e.g Uber: considered how to call a taxi easily by phone locally. The market then shaped the direction and soon it became a global solution.
• One often has to go beyond consumption patterns and be ready to innovate. MPesa was started as an unproven pilot. There were no consumption patterns. Yet because of various factors in Kenya, it was adopted at an unprecedented scale – an example of market disruption.
David: I have a business that exemplifies this "disruption," with a social investment approach. To sort sanitation in the city, we started to make toilets with some start-up capital through a public-private partnership. The company grew rapidly in six months and became a model for counties in Kenya.
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Discussion:
• Consider bringing creativity, innovation and entrepreneurship in formal school programs as part of their regular training. Incubators responded to this gap in the education sector and stepped in to provide entrepreneurship skills.
• Building better business models that are transformative should be one of the components of an incubator.
• Incubators differ in their idea of impact. Some look at impact as the bottom line. Others look at the development of the social and economic environment.
Q: What views are there for making business models in Africa that work in one place, also achieve success in others, basically business expansion in a different setting?
A:
• MPesa, though very successful in Kenya, has not been very successful in other African countries, although huge sums of money have been spent on it. In Kenya, Safaricom was a dominant player. MPea had initial capital from DfID and later, as it grew, from Safaricom.
• Secondly, MPesa helped meet needs which are cultural in nature e.g many Kenyans have a city home and a rural home, requiring them to send money 'home' for various needs like paying farm workers. Hence, MPesa met a specific need. In Tanzania, Vodacom was successful. MPesa worked because of the enabling legal framework and competition. We saw a copycat syndrome where other providers started mobile financing transactions and the market to grow.
• In countries like Mozambique, MPesa has not been successful because of a gap in the demand side. Education is a significant factor in growing markets. In addition, many business people in Mozambique have limited knowledge on business and do not adopt new ideas easily. So expansion to that market is challenging.
Last comments from panel:
• Find a problem that you want to solve and do so.
• If it requires innovation, proceed.
• If replicating another's idea, proceed.
• Simplify.
GES 2015 in Nairobi
Conversation 3: Expanding Horizons: The Next Brilliant Cadre of Women Entrepreneurs
Saturday, July 25, 2015
Moderator: Jean Case; The Case foundation
Panelists: 1. Breanna Zwart, Google, in charge of emerging markets
2. Mark Straub, Kholsa Impact – venture capital fund
3. Nermn Fawazi Sa’d, fonder Handasiyat.net – virtual engineering, Saudi Arabia
4. Isis Nyong’o, founder Mums village
Estimated no of participants: 90 people
Jean: No better investment idea than investing in women
• Kenya has remarkable women investors that have broken barriers
• Women-owned and run business are stable and more secure for investors
• Women-owned business is not about women but about the business. Women should endeavor to position themselves as equal to the task
• Women investment should be about changing the world, focusing on big goals
Breanna:
• Improving visible of small business
• Reaching out to emerging market
• Investing in broadband to enable women entrepreneurs to access information better
• Reach less visible clients and women-owned business to expose to investors
Mark:
• Venture capital fund focused on social impact. Keen to empower entrepreneurs aiming to improve social impact, providing capital to change agents and resolving development challenges
• Focus on ecosystem health; have diversity in your portfolio
• Focusing on emerging market
• When investing, hire people with different skills set than yourself
• Choose managers who have interest in different sectors, have networks beyond yours and have other experience
Nermin:
• As woman engineer from Saudi Arabia, I wanted to practice my specialty yet observe the cultural norms of my country
• Do not put barriers on yourself. As a qualified engineer, I set up a virtual company that provided engineering opportunities in Saudi Arabia to outside world
• Women entrepreneur can change the perspective of their clients by not emphasizing on their gender; focus on providing superior service to clients
• Win trust, don’t compete
Isis:
• Isis started media technology company to build platforms for women entrepreneurs
• Strike a balance between self-promotion. Sometimes frowned upon in certain cultures, and reaching target markets
• Do research to understand potential clients
• Get advice from successful women entrepreneurs,
• Get visibility for your products online
• Produce goods and service that are relevant for local environment
Challenges and opportunities
• With technology, you can build brands for their entire world market
• Technology is a leveler – it removes challenges that are peculiar to women or to emerging markets
• Limited capital leads to risk averseness
• Use technology to identify gaps and to present your products to large audiences
• There are few or no talented women mentors and businesses insulators in emerging markets
Conclusion
• We are what we can imagine ourselves to be
• Banking with people with lower income can be profitable
• Technology is a major enabler of medium and small enterprises
• Kenya is major hub of technology innovations, invest in emerging markets
• Look out for investment opportunities with social impact
• You will meet dream makers and dream breakers, consider failure as an option
• Risk taking is step one. How you weather the risks builds your resilience
GES 2015 in Nairobi
Conversation 6: Building the Next Generation of Entrepreneurs
Saturday, July 25, 2015
Key Discussion Points:
1. Role of Formal Education:
- App Poll: 96% of the people in the room said job training is more impt for the success of a start-up business (as opposed to formal education.
- Need to practice what you learn within a company (internships, work experience)
- Formal education can be boring to an entrepreneur. Formal education needs to be made interesting and be conducted in an experiential learning way. Need to look at how to keep the entrepreneur spirit within formal education.
- Learning needs to be multi-faceted: peer to peer, mentoring, classroom, online, and from practical experience. Need blended learning environments and options.
- Conclusion: Traditional education is not always the best option for getting the skills and experience needed to be an entrepreneur. A mix of training, learning, experience and support is needed to be successful.
2) Search for Talent:
- App Poll: What is the hardest position for a start-up to hire: Top three answers from those in the room:
a) Operations Manager = 41%
b) Sales Manager = 32%
c) Financial Manager = 18%.
- For start-ups it can be hard to find and keep good staff, especially mid-level staff.
- Ways to find and keep staff: create a cool culture and a place that everyone wants to work, Look for broad experience, people need to see potential in our company and be able to relate to the values and purpose. People want to work in a place they can learn, be heard and be creative. Good corporate governance. If you know a good personal and don’t need them, share them with other companies so they will do the same for you when you need someone. What helps you get financial support and backing is the same thing that will help you get and keep employees.
- Start-ups have a soul and values that can resonate with people and this bigger vision will help you attract and keep employees. Give people a title to make up for inability to pay a lot (titles are cheap).
- Personality typing is really helpful to be sure you have the right person for the right job.
- Conclusion: Need training and experience in human resource management because the people can make or break a small company. Start-ups often under invest in HR and hiring the right people for the right positions. Talent (not $$) is the biggest challenge facing entrepreneurs.
3) Role of Incubators and Accelerators:
- Still under debate as we have no data to demonstrate that incubators and accelerators really work!
- Engage diaspora (Korea is a great example of using the diaspora)
- Don’t take a cookie-cutter approach; tailor your approach to the needs of the start-up.
- Conclusion: Entrepreneurs need to look for the right fit when it comes to picking an accelerator. They should look for the right stage fit and industry to find the right match.
4) Overall Advice from Panel:
- Entrepreneurs have to want it, believe, work hard, keep trying, ask for what they need, and know what they want to achieve.
- Entrepreneurs need to be self-aware and mentor-friendly so people are willing to work with you and help out with more then just financing.
- Need to better understand how to measure the success of accelerators to see if they really work.
GES 2015 in Nairobi
Conversation 4: David and Goliath: Linking to the International Supply Chain
Saturday, July 25
Moderator: Shelley Broader, Walmart
Panelists:
- Jay Ireland, GE Africa
- Monica Musonda, Java Foods
- Kitili Mbathi, Standard Bank
Estimated number of attendees: Approximately 85
Introductions:
- GE has $3.5B in revenue, working in 25 countries in Africa;
- Java Foods is based in Zambia; Monica is a food entrepreneur
- Kitili: Standard/Stanbic;
Shelley: Entrepreneurs have a lot on their plate. How important is a reliable supply chain to scale? How? Why?
Jay: Make it sustainable, consistent.
- In Africa, have to build a local presence, have to go beyond sales offices.
- GE has been in Africa for over 100 years, strong in South Africa and Nigeria before Kenya.
- GE has $500-600M in investment in a few years in local assembly facilities and then will source locally.
- How to get in: Have product or capability that can be done locally, then qualify (quality and financial). Goal is supply chain for anywhere in GE, not just GE in Africa, same standards in Africa as anywhere else
- Understand what you do and at the highest quality and look for opportunities
Shelley: Perfect partnership to start business?
Monica: Food retail
- Retail growth in Africa is at 15%
- Concern: Need the right raw materials (…and not just maize)
- Coordinate farmers and aggregation is challenging
Shelley: Example of a partnership?
Kitili: Second largest Coke bottler in Kenya. Had a challenge when 25 largest distributors were selling on cash and constrained by working on small cash flow
- Enter M-Pesa, good start but took 48 hours to get payment into their accounts.
- So designed a system with third party. Trucks would have ID code, so would get instant confirmation and payment with a direct reconciliation.
- Also led to better resupply, so they sold more products
- Also allowed Standard to give them more direct financing, with more working capital for stock and to improve vehicles
Shelley: How to find credible financing at a reasonable rate?
Monica: Still a challenge for SMEs with limited working capital
- Banks need to understand the sector better to discount the invoice rates. For example can pay 30% on 60-day payment period.
- Have a supplier fund (Mass Mart) and work with outside organizations to work with small agro-businesses and partner with the end user
Kitili: We need to move from an asset backed system
- Malawi example: Alliance One, worked with a client who works with small holder contract farmers on fixed price. Bank then creates loan based on value of investment and backs sales with insurance (to cover difference with auction price)
- Has led to better farm gate prices, but also has risk-sharing with industry due to volatility
Shelley: Government role in trade?
Jay and Shelley on PAC DBIA, focusing on agriculture
Shelley: Trade barriers: even with tariff-free textile raw material, transport takes so long they cannot work with Kenyan factories.
- Walmart can get material in days and to shelf in weeks, but with Kenya it can take months.
- Problem is variance of days (not days itself). At Durban Port can take 100+ days.
Jay: People and their capacity are key.
- Critical skills gap has been discussed. We are looking for technical people, and there is a lack of quantity of stem skills. Kenya only graduates 4,000 engineers a year,
- Have a lot of university partnerships, training, mentorships, apprentices, sending abroad
- Some are long term commitments (over two years), but expensive and cannot do it all themselves. Above example was for 20 people, need 250 for the plant alone
- Need to make sure the youth demographic dividend can be capitalized on…need the right training
Kitili: Pitching for financing, wide gap in skills…what are the key skills?
- Understand the difference between how entrepreneurs and bankers see things. Entrepreneurs are very optimistic, while bankers need to see the financials behind the optimism.
- Have your formal records and business plan clearly spell it out, banker then balances performance and business plan
Audience questions:
1. For Standard Bank: Tobacco is a well-structured industry and Alliance One is working, but could you go to new sectors? What collateral is needed, rates, etc?
o Kitili: Key is to have credible end buyer with guaranteed end market and the work with the buyer to ensure the suppliers (farmers) have the right inputs.
2. We have to reinvent the value chain organization for supply chain every time. What is the best practice? How do African entrepreneurs get to American markets?
o Shelley: We are asking African nations to consolidate, but on the other hand each buyer would want their own standards.
3. We need more internal skills. We need African regional trade and African skills transfer. Is there training and help to formalize and improve bankability?
o Kitili: Yes. Example: Enterprise Uganda, an NGO for business plan development that also helps formalize the accounting systems to better manage cash flows.
4. Supply chain management: How can small companies work with international suppliers, as they do not exist locally. Typically have to go to China. How do you manage quality? How do we get past 100% payment required up front?
o Jay: If you can get into our supply chain, you can leverage our skills, reputation, and volume. Band together to get more volume (even think regionally), than approach the international suppliers
o Shelley: Go for the long play, choose quality instead of price when it becomes a mutually-exclusive decision.
5. Do you, the big suppliers, consider what we the entrepreneurs expect?
o Jay: Yes, but many challenges are hard to see, but do not overthink it. Analysis by paralysis
o Monica: I learned by doing with a safe, affordable product. Once we panicked and spent on R&D based on some else’s idea and and got away from the basics.
o Shelley: Also need to avoid putting Western perspectives on ecosystems that cannot support. We meet suppliers where they are, not where we are.
GES 2015 in Nairobi
Workshop 4: Intra-Regional Entrepreneurship and Trade
Saturday, July 25, 2015
Number of participants – 25
Moderator – Solomon Asamwa – Vice President Africa Development Bank
Challenges
• There is minimal trade between African countries
• Moving personnel and talent across Africa countries is a challenge as it is not supported by most countries
• It is more difficult for an African to work in another African country than for expatriates from other continents
• There are immense infrastructural challenges—most of the rail transport system was set up during colonial times for extractive reasons
• There is excessive focus on foreign direct investment (FDI) than encouraging domestic investment by the locals in African countries
• Huge resources are required to maintain or improve Africa’s gross domestic product (GDP)
• Corruption remains a big problem in Africa
• Unreliable policies and neglect- the case of all customs operations closing down in Nigeria during Christmas without prior warning to businesses
• High cost of shipping
• Lack of intra-regional infrastructure
• Lack of African shipping lines
• High-cost of transferring money between countries
• Sovereignty is sometimes an impediment to trade
• Lack of patenting African innovations – case of MPESA not being able to benefit from other companies/ countries that utilize the innovation
• Stereotyping – case of Nigerians being considered con-people
• Visa issuance across African countries is problematic—case of an American getting visa at Kenyan airport yet other Africans have to secure it in advance
Opportunities
• The Global Business Angel Network offers a huge opportunity for start-up businesses
• Intra-regional trade creates internal markets
• African countries need to make it easy to move goods and services across borders
• In 2050, majority of the world’s young people will be in Africa
• African countries needs to consider promoting FDI but also look at local and regional investors as an opportunity
• Partnerships with all parts of the society is required to achieve progress in Africa
• Electricity requirements across African borders will continue to grow
• Small businesses are the backbone for growth
• Banks are averse to start-up businesses. Start-ups need Angel investors to demonstrate the business opportunity
• Mentorship and networking hand-holding are a big plus under the Angel financing package
• The new Africa Angel network is a huge opportunity for Africa
• National business Angel networks are important in attracting investment from abroad
• Large corporations to train small companies especially in mining
• Improve infrastructure
• Increase flights across African countries
• The European E-zone may be a good opportunity to set up an African A-zone
• Improve internet connectivity
Outcomes or conclusions
• Do we need 54 steel plants in Africa? Maybe not, but we need open borders for trade to happen across countries
• Large corporations need to work with small businesses---Riontinto (sp) works with small local organizations to provide earth moving services in their mining operations
• Encourage intra-Africa labor movement
• Improve communication between African countries than focus on the west and east
• “Invention” was important in the 60s’ but today “Innovation” is critical
• The world requires entrepreneurs to bring ideas to the market.
• There are many thinkers but very few take the ideas to the next level
• Governments need to collaborate with Angels in order to get a bigger return on their seed money investments into small businesses
• Angels are good for Africa too, and intra-regional Angel networks are important
Resolutions
• Resolved to undertake “Ease of Doing Business” assessment for regional countries. During the discussion a US entrepreneur offered to donate a team of IT designers to support in the analysis
• Africans need to invest in their own entrepreneurial projects
• Focus on educating the west about Africa—tell the good story; talk to the positive
GES 2015 in Nairobi
Challenge Hack 1: The Shared Economy and Emerging Markets
Saturday, July 25, 2015
Moderator: Edwin Macharia, Dalberg
Panelists:
- Nicola D’Elia, Airbnb
- Jambu Palaniappan, Uber
- Chris Garcia, TapEx
Estimated number of people: 35
• Thoughts on the shared economy
o More than creating opportunities, it is about creating conditions for entrepreneurship to survive (Nicola)
o Understanding your non-negotiables and your flexibilities (Jambu)
o Shared economy is the future (Chris)
o About the optimization of resources, i.e., assets like land and building are underutilized, and operating on a global scale (Nicola)
o Opportunity to address inefficiencies in existing service delivery systems (Nicola)
o Understanding the relevance of your business model outside your local region (Jambu)
• The need to have a foundation of trust:
o Focus on peer-to-peer solutions and network for vetting (Jambu)
o Trust shifts: first based on people, then based on brand (Edwin)
• Taking advantage of the trust created:
o Customers might be willing to pay more
o Turning a social asset into something tangible, ex., can an Airbnb or Uber rating translate into financial credit (Jambu)
• The concern over starting something easily replicable by competitors:
o Comes down to execution and customer service (Chris)
o A function of the quality of service and experience (Nicola)
o Better to have a product which 100 people love rather than 100,000 sort of like (Nicola)
• Challenge of legal and policy framework:
o Most legal systems not capable of supporting the shared economy (Nicola)
o Need to collaborate with all stakeholders to identify advantage to them (Nicola)
o VOTE, to compel legislators to address laws related to the social economy (Chris)
o Getting to a place where line between yours/mine will be crossed (Jambu)
o Deregulation is the way forward (Chris)
• Conclusions:
o Start now and start small, focus, build a brand, fundraise and up scale (all)
o Shared economy is bringing back our lost social interaction (Nicola)
o The social contract has to evolve (Jambu)
o Important to advocate for companies which operating in the shared economy (Chris)
o The largest beneficiaries of the shared economy are those at the lower socio-economic levels (Edwin)
GES 2015 in Nairobi
Workshop 3: The Missing Middle
Saturday, July 25, 2015
Moderator: James Pickup, Middle East Initiative
Panelists:
1. Gachao Kiuna- Transcentury
2. Funke Opeke-Main One
3. Ben White-VC4Africa
No. of people in the room: Approximately 40
Key discussion points:
• The discussion started with trying to define what “missing middle” was referred as “the valley of death” in most businesses. This the moment when you want to grow the business but you have minimal cash flow.
• When you visit the banks for financial support, they dismiss you.
• This is a global problem but is more acute in developing countries.
• The banks are more conservative here in Africa compared to the US.
• There was discussion on what donors should do to support investment partners. Donors can and should support ventures with qualified and skilled human resource in addition to providing technical assistance
• The donors should consider to lengthen the period of support. It should be even beyond 36 months
• The donors should also be ready to provide “catastrophic money”; that is, they should be ready to allow the ventures to experience the first fail if need be.
• People should not wait for the governments to solve the “missing middle” but can look to angle investors who can inject some capital to help the small venture investments. The average has been seen to be $200,000
• Funke Oreke told of her incredible story where she built submarine cable for Nigeria to improve connectivity. It was very difficult to get financial support that she needed but AfDB stepped in. She emphasized the need to engage qualified professionals for feasibility and planning stages. She also had to ensure regulatory requirements were met. She emphasized the importance of professional networks. She ensured that she had professionals in her board that met once a week
• Gachao talked of how Transcentury started as an investment club with 29 members and starting capital of Ksh 240,000 ($ 2400) but now it has an equity of $200 billion. Their strength was identify an appropriate market with under penetration. Hence, there is need to study why the market has not been met and what you can do to supply that market. He said the “valley of death” can get deeper and deeper.
• He said that great entrepreneurs do a lot with little cash
• It is important to keep an eye on cash flow and ensure you collect your debts which can be a major problem
Questions and answers session:
Q; There was a question about sanctions imposed on Sudan. It is denying entrepreneurs opportunities for growth
Answer:
• Funke and Ben White Need to look for angle networks and also think beyond the national boundaries and should move to any other market in Africa. This can be done by linking with others. Build strong network of organizations. There was a lot of talk about angle networks
• Getao: Talked of learning from other mentors and get inspiration from their successes
• One should also address the mindset to overcome challenges
Q: When do you sell a venture especially if it is struggling to stay afloat? There was concern about multinational cannibalizing and crippling indigenous investments
Answer:
• Getao: It is difficult to say when the right time to sell a business. Time and opportunity are capital by themselves. Once a business reaches a certain level, the founder may not be the right person to take it to another level. 80% of the businesses are sold too late
• Carl said that when you lose your passion, that is the time to sell.
• James (Moderator) said that many people have attachment to businesses and don’t want to let go even to sell some equity. This is even worse in some cultures which are much closed e.g. In Middle East
• Ben White said that some businesses are being sold too early. You can let someone take up management and take further
• Ben White talked of cross-funding. He also said that many businesses need more than money. VCAfrica is a strong proponent of angle networks
Q: Definition of SMEs-It was said that multilateral banks discriminate against small businesses and hence need to define what SMEs are, especially women-owned. It is difficult for women to access loans?
Answer:
• Getao: Successful businesses would increase GDP, create quality jobs and even export
• Carl: SMEs should instead be referred to as Small Growth and Businesses
Q: What can one do to make his/her business be attractive to the big investors?
Answer:
• Getao: There is a need to look at the team; focus locally and built your team; how you present your idea-showing deep thinking, i.e does the person live and breathe the idea! It is good to look at the execution of the idea since at times good ideas are not executed successfully. One gets better and better with time
Q: When does culture becomes a risk? How do you manage risk in an African context?
Answer:
• Funke: The largest procurers are government but there is a need for strong laws.
Q: Why are media houses not taking up local content (in Kenya)? This leads to low investment in the sector and banks are reluctant to provide loans?
Answer:
• Funke: Emphasized the need to keep strong and not give up
• Getao: The media structure was difficult but since there have been were reforms in media
• Banker: Banking models have changed and can be able to assess risks. Once, you built credibility, you can get unsecured loans
Q: How did Transcentury grow from $2400 to $ 2 billion?
Answer:
• Getao: Their initial idea of investing in South African Breweries did not successes but the next investments were well targeted. It now employs 3500 people. They later focused mainly on retail businesses. His parting shot was, “Entrepreneurship is not about winning big tenders.”
