There’s been a growing list of diasporas and expats flocking Africa in the past decade. A sizable number of these have their eyes fixated on the burgeoning tech startup scene. Mark Karake, a Kenyan who had spent a significant part of his career in Silicon Valley, joined that list.
In March 2018, Mark decided to return to Nairobi. The goal, he says, was to contribute to "unlocking the potential of our local startup ecosystem.”
By doing so, he joined the likes of Iyinoluwa, Tayo Oviosu, Jason Njoku, and more. These, too, returned to take part in Africa’s tech startup ecosystem.
Though, Mark is looking at contributing in a different way. He is looking at not only investing in startups but also share his knowledge and experience.
In April 2018, he launched a fund - Impact Africa Fund - a seed stage fund aimed at technology startups in Nairobi. He points out the “lack of supportive seed stage financing” among the key reasons for starting it.
Yet, although he is now running a fund, he is also a firm believer that “money is not the entire issue for local startups”. Rather, the “lack of invest-ability”.
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He, thus, saw the need for an accelerator. Impact Africa Network, an accelerator, thus followed the fund. It was launched in August this year. Its role is tackling the “very low levels of startup development skills and entrepreneur support". Though, the focus, for now, is Nairobi.
Initially, Mark had bundled everything under Impact Africa Fund. But, he says that after some time, he saw it necessary to separate the two. “After some work in the ecosystem I saw the need to decouple the technical assistance work from the fund,” he says.
He now maintains that the fund and the accelerator are two separate entities. “Our fund is a separate vehicle from the accelerator,” he says.
Though, it is not hard for one to see how each can leverage each other’s strengths. First, through lessons learned from either and the guaranteed deal flow for the fund.
The key reason for keeping the two separate, according to Mark, is because the “business model does not work.”
Thus, unlike some accelerators, Impact Africa Network is not built on the back of investing capital in the startups admitted.
"I am currently self-funding the program and will be seeking grants,” he said. “Because there is no business model that fits with the work that needs to be done to support early-stage founders.”
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He adds that they are taking self-funding and grant funding route because it is what makes economic sense currently.
“There is not yet enough volume of invest-able growth startups to justify a venture model," he says. "On the other hand, most startups are not liquid enough to afford to pay for the value we provide."
"We, thus, take a small equity stake as compensation for the time and support we provide to ensure long-term alignment with the startups."
But, grant funding is under question for creating a culture of dependency, instead of sustainability.
This is because, tech hubs, the backbone of Africa’s tech ecosystem were built off grant funding. Yet, most - if not all - across the continent have failed to identify a viable business model or achieve sustainability.
Though Mark disagrees. He is a firm believer that some hubs, like iHub, have played a critical role in shaping their respective ecosystems. And, that’s thanks to the grants.
“They did their job of catalyzing the ecosystem in the early days and we are seeing the benefits of that in our own ecosystem,” he pointed out. Adding that people are “measuring the wrong thing”.
In fact, he thinks that more grant money is still needed. “We need another 5-7 years of grant funding that is focussed on a different type of intervention,” he says.
Currently, Impact Africa Network is admitting startups on a cohort basis with each made up of only 10. The plan is to run three cohorts a year over a four months period for each cohort.
When it comes to the selection criteria, they only consider startups with “some traction". This can be in the form of paying customers or an organic growing user base for your product.
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The accelerator program mirrors certain offerings from prominent accelerators like Y Combinator. “Some of the things we do such as Startup School are like YC,” Mark says, though, “with some critical differences.”
One of the differences includes "working with startups in the field and not in class". They also provide them with “custom advice and practical feedback” on an ongoing basis.
“This means founders don't have to take their valuable time to attend generic, extended classroom-based programs over many weeks or months.”
Mark believes that the above is crucial. Because, some, if not most, of the people trying to help startups, are doing it in a way that makes it challenging for many entrepreneurs to take part.
“Few ecosystem actors have had direct startup operating experience," he says. Adding that this "can be a blind spot.” “It is very difficult to give useful advice in an environment you have never experienced first hand.”
He also points out that “when people don’t have meaningful exposure with startups they often have a difficult time guiding a tech startup because they present very different situations than traditional businesses or corporations.”