May 162009
 

I wonder what, exactly, is my job title sometimes. My card says “Partner — East Africa” but that doesn’t say much.

I’m working with Mike on his pitch for SBSVC. He don’t exactly need capital, but it’d make AEP move faster, further, and achieve profitability sooner.

The early-stage companies that I’m working with, has got me thinking, as I always do, about the market and landscape here in sub-Saharan Africa, most of the same problems and issues that entrepreneurs face back in Silicon Valley, London, New York, or Asia– they are just magnified here.

Venture capital
There are a lot of misconceptions around venture capital and angel investing. Most entrepreneurs go out looking for the largest possible cash flow at the lowest valuation, without considering what else the VC might bring to the table, i.e.

Experience
Contacts
Networks
Advice
Business
Modeling

These are just a few of the things. Most VCs (the only ones I’d want investing in me) have experience as entrepreneurs and at running businesses. Most of what I see as the big failures in VC from the past– I lived & worked through the heart of the dot.com and the Web 2.0 bubbles– have been, broadly, the fault of having the wrong investors. Kozmo.com being the prime example– some guy with an Excel spreadsheet thought they should take this FMCG service company and sell Palm Pilots at a huge markup.

The VC should be the person who, once they’ve picked you as an investee, will do the right things to make the pie bigger. It doens’t matter so much if you give her huge equity slices; she should work to make the pie big enough so that all parties have more actual cash.

Partner
One of the women I’m pre-screening as a p0tential investee is a fascinating woman. She’s lived and worked all over the world, but is here in Uganda and has invested heavily in a fish farm. Fish farming is controversial worldwide, but here in Uganda the fish that are typically farmed are catfish and tilapia– two of the “OK” fish to farm (low resource usage, high tolerance for variable conditions, etc).

She is excited about the opportunity to work together on an equity basis, in partnership.

Mentor
Mike had originally been using the term “Venture Search” for our model, but it has a fairly specific meaning that is tangential to, rather than describing exactly, his business model.

I like the term “Mentor Capitalist”: Provide many of the benefits of a traditional VC, but in a more hands-on fashion. Provide network breadth while the VCs provide depth.

Building markets
The market for angel investing and venture capital has to spring from the fertile ground of entrepreneurship; entrepreneurs, however often need start-up capital. In some cases– in the cases where AEP is trying to work– tilling that entrepreneurial soil to attract interested investment capital and a new network of angel investors, setting up a virtuous cycle.


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