Do Venture Capitalists, Angel investors, favor whites in Africa

Over the years, I have had a chance to hear many people talk; some brilliant some not, I have listened and interviewed people with start up ideas and growing businesses and the struggle to break to the next level. In that period you listen to people and you can tell those committed and those not, those going places and those just waiting time.

Until very recently (in Kenya at least) starting a business meant using your savings and shoe stringing, pooling money with friends and getting money from family members to start and sustain your business.

Financing your business through Venture Capital and Angel Investments came into fashion in Africa tech three years ago. The starting of the tech spaces brought together some Western immigrants with idle money, others without, some educated, others not.

I remember attending a meeting about rising Kenyan tech companies and in a room of about 20, there were only two black women and a black man. Others were western immigrants running companies in Kenya and the going conversation was that they had sufficient money and all they needed were ideas.

The best part is that even my fellow woman noticed the trend and wondered if there were no Africans in tech doing good stuff. Believe me when I say that all those ideas sounded sexy, but had no was of making money or breaking even in the next five years.

We wondered if such enterprises were being run by black people, would they get attention from a giant multinational with bottomless financing capability? It led me to ask; is VC funding inherently racist?

Get me right, at times people feel comfortable with people they know or know where they can get them from if everything went south. Maybe thats what is used to justify tribalism.

I have heard stories of one company getting VC funding and a relationship is established. The company is then sort of made the local contact person and the go-to person in determining whether the VC invests in local companies. The story goes like; anytime the VC made enquiries and the company was headed by local chaps, the local contact would discredit the company and dissuade the VC from funding but you can guess what happens when the reverse is the case.

 

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I talked to a bunch of people on the race specific question. These are some Kenyans running tech companies and have had experiences with international VCs. I know I can be unhinged but the comments I got were very honest and sad.

For a more tempered news article, you can read this article on how business challenges hinder VC funding and can continue to the comments below.

Here are the comments I got to the question- is there any connection between VC funding and race? Do whites find it easier to raise funds?

From personal and painful experience the black man is at the bottom of the foodpile when it comes to EVERYTHING – venture capital, prospecting, sales, costing …

I think the only person who’d have it harder is a black woman

—- @roomthinker

It’s more about your network and access than it is about your skin color.  Many Kenyans who are grads from Stanford or Harvard have an easier time raising funds than an mzungu who didn’t go there.

— @whiteafrican

Its a 50-50 thing. Race matters when you are playing in some mission critical fields and very few people want a black dude driving a mission critical boat, but race is also waning as money diversifies and networks grow and the number of black investors increase and white investors realise that there are some mad skills with black people too.

—- @kahenya

It depends. looking at Fanisi, TBL, Aureos, Savannah, Fusion Capital investments and you will realize that the majority of ivestees are black/notwhite

—- @agostal

I loved @69mb’s quote below, its probably the evidence you would ask for.

Race as a factor and should not be understated. Even with equal networks and access, the mzungu will have an easier time fund raising.  
Angani’s experience is a case in point:
The Angani team comprises of:
* Myself with experience in building and managing large mission critical systems for small, educational, large and non profit organizations.
* Phares who helped build the VMware market in the region
* A Cambridge PHD who wrote parts of Xen, a core virtualization technology used by the likes of Amazon.
* A reseller who has a *very* successful business offering virtualization and storage solutions to corporates. 
* And a couple other people with equally good track records. 
 
Yet, we have been told we know nothing about building clouds. Literally. 
 
Come in a western entrepreneur 
* No team.
* No experience. 
* Not very technically astute. 
* No network/access. 
 
Yet, he approaches the same individuals and they are more receptive.
We have also experienced the other side of the same coin. We have been told by respected local business leaders in tech, to leave Infrastructure to the likes of Amazon and Google. That it is too difficult and we should focus on apps(mVitus) instead.
— @69mb
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I know there are some people who say that you got to believe in your self that the system hasn’t been gamed. But what if it is what it is? Its either networks or people prefer to give money to their own colour even when the ideas are shitty.
I am sure very soon we will have some enterprising people who can help clinch a deal if all what people is the skin colour.
Liko also made a very nice argument that money is not the only thing that makes a company. But I wondered if he had attended some of the start up pitching events where  people look for VC funding even for projects they can shoe string. Its that phase where looking for money and investments is vital.
I am sure there are also black people who have received funding just because they are black 🙂 🙂
🙂 🙂

What is the problem with Kenyan techprenuers?

A few weeks ago, I was speaking to my friend and the topic of iHub came up and she made it clear that she can no longer hire or engage someone whose main achievement is working from the iHub.

My friend is one of those well adjusted and grounded people and she would never say this just for the sake. There are others who just say it because they heard it or because of someone else’s experiences.

My friend’s problem was that in her technology firm she had engaged various people and in most cases she needed someone to develop a product or a component of a product. The experience was that after you pay the deposit, the guys never finish the work and when you question, the person says they have since moved to a more cool idea and that the project from which they received the money, was small and was not worth their talent.

Her problem was, the techprenuers seemed to lack discipline, when you take the deposit, finish the work, because you have already committed yourself. The feeling was that these guys move on to someone else, get the deposit, leave the work half way and the cycle continues. To some extent I agreed with my friend and shared my experiences running a business.

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What has the iHub achieved?

In March 2010, Kenya’s tech Community came together for a unique event; the opening of the iHub. After many years of discussions and Bar Camps on what was ailing Kenya’s tech community, the presence of an innovation hub was deemed as key.

During those discussions, techies said that one of the  reasons they hadn’t ventured beyond their employers was because they had no space that could serve as an office space or a reference point. If you need a contract, it helps if you are not a briefcase entity.

There are other reasons why the iHub exists but for the sake of brevity, I will deal with one; the relationship between the iHub and the devs, creatives or anyone who is a member. For the sake of consistency I will call them all techies.

For the original stories in 2010, you can read this piece by @whiteafrican or this piece I wrote on the iHub blog those days.

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Mobile internet subscriptions grow, matching fixed lines

Mobile internet usage has grown tremendously, almost matching the number of fixed lines. Africa is know to be a mobile services continent and there is now research figures showing the level of growth.

Research commissioned by mobile advertising network, Twinpine, has revealed that mobile penetration is driving internet usage across West Africa and playing a fundamental role in economic growth. The study analyzed mobile usage across Nigeria, Ghana and the Ivory Coast was carried out in conjunction with Kenya-based iHub Research

The study found that mobile subscription in the three countries has more than doubled between 2007 and 2011, with a combined total of over 130 million. Mobile internet use has also grown significantly in recent years to reach penetration levels almost equal to fixed line use. For example, in Nigeria fixed internet usage stands at 28% compared to 26% for mobile internet usage.  While in Ghana fixed internet subscriptions are at 10% and mobile internet at 9%.

Despite the growth in mobile, total internet usage is still below half of the total population in these countries. This is a result of lack of fixed line internet infrastructure within much of Africa, hindering internet adoption rates. Mobile internet is changing this trend and bringing internet to the masses

The research shows that mobile internet penetration will continue to grow in the next year, and as such, it is clear from the data that mobile internet use is set to surpass fixed line internet. A contributing factor is the uptake of smartphones by young people who access the internet and use social networks from these devices. The research found that facebook is the most popular website visited on phones across the three countries.

Elo Umeh, CEO Twinpine and Co-chair of the Mobile Marketing Association, West Africa said: “Poor fixed line infrastructure in Africa has acted as a barrier to internet adoption for the majority of people, and is the reason for limited broadband adoption across the continent. However, the exponential growth of the mobile market in Africa is closing the digital divide by giving the African population widespread access to a rich variety of affordable mobile technologies. As the research shows, mobile internet is set to become the primary method of going online.”

The growth of mobile in Africa will increase. For example the UN’s 2010 World Population Prospects study found that 42.8% of the Nigerian population is under 14. As these users come of age, there will be an explosion in mobile and internet usage presenting local and international brands with a huge new consumer audience to engage with.

Umeh added that: “…it is the time for international brands and publishers to tap into the African mobile boom to maximize the revenue potential of mobile advertising. Already Nigeria, Ghana and the Ivory Coast are achieving high monthly advertising impressions – Nigeria is especially strong with 3 billion impressions a month.

However, to ensure brands deliver the most impactful campaigns it is critical they do not approach Africa as a single entity; they must develop a rich understanding of each and every one of the continent’s 54 nations. Working with the local mobile advertising networks like Twinpine will give them instant access to a wealth of local knowledge from the start, greatly reducing time to market.”