growth
Business Management

Contador Harrison (Africa) - How East African Tech Startups Can Attract Investments

East African media, just like their counterparts in the rest of Africa, have for decades been accusing international media outlets of ‘negative' coverage and ‘selective' reporting on the positive developments that has seen the continent migrate from its ‘hopeless' to ‘hopeful' tag over the last decade. In East African Community member states, an economic block with an estimated 130 million, people are witnessing the fast growth of technology startups. However, despite the high numbers of registered entities, many have failed because they only have great ideas and lack the much-needed cash required to transform these ideas from concept to commercialization.

Many startups in the region have some of the greatest ideas that I have come across in my technology journey. Unfortunately, most of them fail to understand that potential investors may not share their enthusiasm. A fortnight ago, a startup approached a Russian friend of mine for investment, but after exchanging a couple of mails, we could not understand what their solution was trying to achieve. What most fail to understand is that in order to convince other investors to inject capital into their startups, they need to explain the exact objective of the business. For the thousands of technology entrepreneurs in East Africa, they should not expect everyone to fall for their ideas and in turn, immediately buy into those ideas and invest in their business. In the case of my Russian friend, the business never addressed profit nor revealed their management team profiles. Any investor interested in investing needs to see how the business can create profit and ultimately guarantee them an appetizing return on investment.

I would like to offer some advice to startups in East Africa (especially Uganda, Kenya and Tanzania): you need to address several factors in your presentations by focusing on how, as a new business, you will make money for them. In my experience in the industry, I know all too well that investors do not care an inch how great the solution is behind your idea. In fact, because of so much competition, most investors usually allocate five minutes maximum listening to your idea and by the sixth minute, their minds are already made up. The person pitching for funds must be able to convey the business idea to them.

As an investor of various startups, I know that the bigger the problem, the more vital the solution becomes. Most investors, like me, are not interested in the exact programming languages used to develop the solution - they just need to buy into the idea - as long as the team involved knows what they are doing. As we found out with my Russian friend, the startup failed to extensively offer details of his background and the team. Investors invest more in talent, experience and expertise than they do in a technical solution. Those eyeing technology startup investments in East Africa are mainly interested in whether a solution has the potential, in a 130 million people market, to offer mouth-watering returns.

In the startups I have invested in, I started by scrutinizing revenue model, commercial viability and the longevity of the business idea. Unlike what most think, the best investment is not money, but expertise. Before seeking cash injection, ensure your team is up to the task. The next step would be to look for access to networks within your target market industry. After that process is done and dusted, start engaging potential business partners by sourcing for a strategic partner who can help you with growth and expansion plans. If you are transparent, a person of high integrity and the person behind the original, not imported idea, success is guaranteed.

 

By Contador Harrison, Software Director, Somocon Oy

 

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