Why we are Building an Angel investment Network in Uganda

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As the rest of Africa is busy finding its place on the global investment map, a different story - with “steady progress” becoming our reality - is slowly, but surely, being written in Uganda.

Justice Anup Singh Choudry’s thoughts on Why Investors shun Uganda rings loud and does not even begin to tell the story of entrepreneurs, startups, and SMEs in securing investment.

The bureaucracy, endemic corruption and confidence when it comes to securing legal redress or commercial justice speak to our national ratings as investors evaluate their destination in appraisal with the region.

Let us take a step back to understand the impact of the above investment culture to an everyday entrepreneur, startup or SME; just to be clear we are speaking about the most entrepreneurial country in the world.

In 2016, Africa received over $380M to invest in entrepreneurs, $109M ended up in Nigeria, South Africa received $96M, Kenya $92.M, Rwanda walked away with $16M and Uganda received only $300,000; and yet we are the most entrepreneurial?

Over the last 3 years, 72% of the financing that has come to East Africa has gone to 3 firms all with Kenyan origin while 90% of it has gone to expat founders; and yet we are the most entrepreneurial?

At the just ended LeO Economic Forum, I sorely listened to Patrick Muhirwe of Stanbic explaining to young entrepreneurs and innovators how banks work and as you can imagine justifying why banks are not a go-to destination for financing.

At the same forum, the CEO of Tugenda one of Uganda’s most promising asset finance companies Michael Wilkerson remarked that “the best advice I can give you about raising funds is DON’T — there is none.”

He goes on to explain the many conversations you will have with investors who will ask for a million documents only to apologize that they only invest in a totally different sector, something that could have been picked up earlier.

Amidst this reality, the tale of a cross-section of Ugandan entrepreneurs is one driven by passion and determination for an alternative amidst an environment that makes it look like everything is against you. It is almost like moving in the dark.

‘The economy is tight’ are perhaps becoming the most spoken words while referring to Uganda’s business environment. The six core requirements of entrepreneurs are capital, networks to scale, market opportunities, skill/competence to consistently improve, information and trends to inform decisions and an enabling policy environment. Most entrepreneurs act in isolation of these and so they fight a lone battle and in most cases pivot off to the next business.

The rest of Africa is finding its place on the global investment map, part of this is the emergence of Angel Investment as an alternative source of investment for entrepreneurs. Angels are typically the earliest equity investments made in startup companies.

These could be by experienced entrepreneurs themselves, high net worth individuals and industry thought-leaders that enjoy working with companies at the earliest stages of business formation. Some Angels get involved even before there is a completion of a proof of concept of the idea that they intend to commercialize.

Probably the most misunderstood component of this relationship is that it is based on only the exchange of capital. Investors need to understand that entrepreneurship is inherently a risky venture. While an entrepreneur must learn “to make revenue-driven decisions, as opposed to passion-driven decisions, the Angel Investor can work as a Catalyst to mitigate risk by grooming a more mature entrepreneur.

Building The Innovation Village has taught me that creating a destination for entrepreneurs without motivating other pillars of the ecosystem like investors, corporate ventures, and academia is trying to live on an island. Our response to the lack of investors was Kampala Angels Investment Network.

We mostly targeted Investment clubs that are known for traditional investment options like stock and property including land and buildings. Our count is now six investors and a sudden impact has been the attraction of foreign investors who are pleased with the confidence of local investors and want to match them.

I am excited to be joining other speakers at the Africa Business Angels Summit in Capetown this November. The Summit promises to bring together angel investors, the venture capital community, corporate partners and government representatives to exchange best practices, share lessons learned, and shape the roadmap for eearly-stageinvesting. It is themed around Co-investing and making it work together’. With most economies in recession working together is the only way forward to unlock capital fast and maximize Uganda and Africa’s entrepreneurial potential.

For a concept that has taken flight in most of Africa, now is a good time, on top of the age limit debate to begin other conversations like how we might all work together to ensure 95% of our entrepreneurs are not dying in their first year of operation.

This article first appeared on CK Japheth's medium page.

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