About three weeks ago, Nikolai Barnwell of 88mph accelerator or tech incubator did an interview with Reuters, explaining whey 88 was moving to Nigeria and closing its Kenyan operations. The article has since been reproduced locally and you can read it here. The gist is that Kenya is hyped and Nigeria is more stable.

There has been heated discussions online, and Andrea tackled it in her column. There are other discussions online; in mailing lists, Facebook and twitter 🙂

When I read the interview, I had several questions and I sent some to Nikolai and he promised to respond, let us hope he does. There were other questions that needed to be answered by some local tech start ups who have made it or are on the road to making it.

Just to be clear, 88 invests about $25,000 about sh. 2,225,000 as the maximum but is also subject to negotiations…can be less.

 

There is no denying that for every company that succeeds, there are probably 100 or so others that met premature deaths or were still born. To that extent, we can say that challenges are abound but does it mean that the Kenyan market if fluffy?

Last Saturday, I met the founders of Pesapal.com, angani.co.ke, innova.co.ke, and wezatele.com (it recently exited). The idea was to get a candid discussion on whether we are actually full of fluff, whatever that means.

First, let me say that I met Nikolai three or so years ago when 88 was an empty hall. I asked him what his strategy was, and he said the idea was to fund start ups, hype them, get clicks and eyeballs and then sell it off. Apparently this model has succeeded in Europe.

I remember thinking, this is the biggest load of bovine deposits I had encountered in a while. I asked whether he had done his study to know whether the European model will work or not and he said he had, so who was I to think that our market is different. I asked him whether this is still the model and he is yet to get back to me on that.

Now, lets get to the fluffy part….

1. Yes, it was his opinion but does it make it authoritative, however erroneous?

I felt bad that 88 has been unable to play in the Kenyan market and instead of owning up and saying they had made poor choices, they say the market is fluffy. Doesn’t this speak of 88’s choice of investments?

Their inability to ride the tough tide isn’t because of fluff, its poor choices; 88 killed Pesatalk, probably the best idea they had, and when Wezatele went to them for investment, they turned them down and a while later, they were bought out by an international firm. In the case of Wezatele, is it out of fluff or poor choice?

I am sure others have similar cases of turned down options but I am yet to see a success out of 88 that has exited and has a product in the market.

I think it was important to get the view of another incubator that has had companies exit or go ahead and launch products in the market. Why would Safaricom launch a $1 million fund if its fluff? And why would investors fund all these companies listed by @whiteafrican? In one year?

2. Investment is not equal to advice

There is need to separate investment from advise. If you give money to a company but you have no knowledge of the local market or have no mentors to help them, the companies will surely not survive. The two need to be separated. 88 may have invested in these companies, but were there mentors?

3. Start up founders need to say no to investors

This applies to those crappy ideas investors come up with, just because it worked in Europe, US, it doesn’t mean that it will work in Kenya.

Upon conversation with former 88 incubatees, it happens that once they invest, the start up is then forced to take on western consultants who know nothing about the market beyond Ngong road and the national parks and to take up office space at 88, at a cost of sh. 10,000 per person. Imagine if you have three developers, two founders, thats 50k a month, and they don’t allow you to take up cheaper space elsewhere.

This is the model that is doomed to fail, if all the successful companies started by renting expensive space and include other overheads, then thats a deal doomed to fail. Bear in mind that sh. 2m isn’t much.

4. Too many expatriates….. that is all…

so……

There is so much we can say about government, culture…etc… but this is a market and rules of natural selection apply. You come to a market and within two years you want the start ups to “disrupt” and take the market by storm. You got to be patient.

For instance, Pesatalk seemed like a good idea but needed a lot of support and networking with the local finance market. The idea was to provide financial information in a very simple and understandable language. Think about all the old, young men and women you see at AGMs, you think they understand fully the lingo? The company could be saying they squandered the money but they put it in a way that you need to read the newspaper or online to get what was meant. Pesatalk was to synthesise this info. This needed high network and patience but I could see it lying off in a few years.

I can only imagine the people who will lose their jobs but even then, the failure by 88 to read and predict the market and support its start ups doesn’t mean we are crap. Failure to choose the right investment doesn’t mean that its fluff, its a question of 88’s judgement and their advisors/handlers.

The article quoted Nikolai saying that founders of Facebook etc come to Kenya and go shaking their heads, I wonder whether he knew that in 2008, way before there were any hubs, Facebook was sponsoring start up garage? You can read here.

My question then is, if Facebook was in the Kenyan start up scene before there was any hub, it was dry land, how then would they shake their heads, except in approval that the seeds seem to have germinated?

There are many start ups that will come after 88 is gone to Nigeria, and they will succeed if they follow the right business principles.

Ends