Thank you for writing about this topic.
First let me point out that I did say in my email that I was busy and not able to answer before early this week. So I’ll just respond directly here instead of emailing you. I hope that is ok for you.
I’ll try to be brief but some of this is fairly complex as you can imagine and does require more than a one liner. Also, by now there have been so many blog posts about 88mph and our model and most of the time the information is straight up wrong. We are often too busy to answer all these posts, but this time I’ll try to expand a bit so readers can refer here in the future. If you want me to expand on any topics, please reach out and I’m happy to do so.
1) 88mph is not closing down its Kenyan operations. We are indeed taking a break from investing in Kenya this year, but there are many reasons why:
One reason is that most of our small team was busy running our first accelerator program in Nigeria this fall. We are a small team, operating in 3 different countries with 43 startups under our wings.
Another reason is that we are focusing on the companies that we have in our Kenyan portfolio now rather than stretching ourselves thin. We are actually very involved with our startups and help them long after the official 3 month program. You can reach out and ask our portfolio companies.
Another is that we are fully invested with our first Kenyan fund and would have to set up a new structure and raise a new round to do more investments in Kenya. We didn’t have time to do this.
2) 88mph normally invest up to $100k per startup, though we have gone higher on one occasion.
3) We are not moving to Nigeria and shutting down Kenya because there’s too much fluff in Kenya. When you look at the two markets then yes, Kenya has more NGOs, more pitch competitions, more awards, more grants, more journalists writing stories about Silicon Savannah, more of all the stuff I referred to as “fluff” in the interview. I think it’s hard to deny this. Nigeria has little of all of this compared to Kenya. But that has nothing to do with our decision to start a program in Nigeria. We are doing Nigeria because we found an awesome partner in our joint venture (440.ng) and we got an amazing opportunity to enter a market we find extremely exciting.
4) I’m very sure I’ve never said that we wanted to fund companies to “hype them, get clicks and eyeballs then sell”… We have always wanted to invest in great entrepreneurs and yes, because we are a commercial investor, one day sell and make a return. We don’t want to hype silly ideas. Our model isn’t to flip startups. We want to build solid companies. I have never claimed that this model works because I “studied” it. I studied music
5) You are right that success for the investor is ultimately an exit and a return to shareholders. But it takes many years to build a solid company and we have never expected to exit any companies in our first 3 years in Kenya. We have made some investment that just didn’t work out, but that’s the name of the game. That said, we have made some really great investments in Kenya. Many have products, revenue and some are even profitable already: Ghafla, Futaa, Mdundo, Movas, Yum, Hivisasa, Nanovas, BookNow, just to name a few of the ones we’ve invested in in Kenya. We are far from saying that we haven’t picked any winners in Kenya.
6) Whether or not 88mph provides valuable advice and assistance beyond our money is a valid question. However, I think this question can only be answered by our portfolio companies. I encourage you to reach out and ask what they think. But please do ask more than just the one we decided to shut down. It doesn’t give a very full or nuanced picture.
7) We don’t hire or use “western consultants”. We have experimented (with varying success) having Entrepreneurs in Residence, who for instance, do all the graphic work for the startups doing the program (if they want the help). We don’t force the startups to take office space at the Startup Garage (88mph’s home). We do require them to work from the garage for the length of the program, but we actually pay for that. They don’t. And after the program they are free to move elsewhere. Some companies move to find cheaper space, be closer to home, etc. Some companies stay.
8) I’m happy you think PesaTalk was such a great idea. We thought so too But for many reasons, we didn’t have time/energy to really get if off the ground so we decided to shut it down. I strongly encourage to set up a financial blog and run it as a business. Maybe you’ll have an exit here!
9) I fail to understand the argument about facebook. I’m talking about individual angel investors looking for investment opportunities and you are talking about a massive global corporation, extending it’s developer program to the regional capital. I don’t see where the connection is here.
Summary: Investing in startups is a tricky business everywhere. Also in Kenya. Kenya has ups and downs, like any market. We are happy with our investments in Kenya. We have met some great entrepreneurs whom we have helped build cool companies. There is fluff in Kenya. But that is a separate discussion (which has already been beaten to death on Kenyan blogs) and has nothing to do with out decision to run a program in Nigeria.
I hope this helps people breathe again before they get all up in arms about how horrible it is that some investors want to make risky bets on entrepreneurs in Kenya.