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Jumpstart tackles funding for startups

At Jumpstart’s last meeting held on 13 June 2012,  entrepreneurs had a chance to explore various funding models available to them. The keynote speaker at the event was Munya Chiura, Head of Africa Operations for Grow VC a venture capital platform specialising in matching investors and start-ups using the crowdfunding model. The core of Chiura’s message was captured in the title of his talk:“New and Innovative Ways to Fund Your Tech Startup!”

According to Chiura, Grow VC has US$30 million in funds that is available for entrepreneurs to tap into. Mind you the platform operates in over 100 countries so there is bound to be a fair amount of competition for that funding.

The Grow VC model is interesting in that unlike traditional funding models it leverages the power of thousands of investors who each place fairly small amounts into a startup in exchange for equity typically up to 15%. The model provides a win-win proposition for both parties as investors minimise their risk exposure and startups part with a minimal amount of equity and therefore retain control.

Crowdfunding Grow VC believe is ideal for Zimbabwe as the small risk exposure for each investor may prove to be attractive. He encouraged entrepreneurs to also explore local government facilities such as the Youth Empowerment Fund and myriad of VC firms that are active on the continent. He pointed The Acumen Fund because who are very active in Africa and have a special focus on projects with a strong social impact. The need for local techies to think outside the sandbox was demonstrated by the fact that there was no Zimbabwean representative and the recent Open Innovation Africa Summit (OIAS) held in May in Kenya. OIAS has strong partners in Nokia and the World Bank who are prepared to support great ideas.

An ideal example of what a crowd funded start-up in Zimbabwe would look like is CINTEP a manufacturer of water efficient shower heads. The company received an initial round of US$100,000.00 from 300 investors in return for 15% equity.

Although Grow VC has been in Zimbabwe for about a year they  are yet to make an investment here. This Munya explained is not a bad sign as there is a lot of potential in the Zimbabwean space, the challenge is for entrepreneurs to present ideas that are at least backed up by an MVP (Minimal Viable Product). Present at the talk were a couple of developers who have already have products that meet this criteria, for example Tawanda Kembo’s IPaidabribe.

An interesting slide in Munya’s presentation was this one:

So the Valley of Death is that period in the life of a start-up where most ideas stall and expire. For one reason or another the idea simply fails to take off, maybe the technology is not good enough, the team is incompetent, they run out of money or the product fails to get market traction. In Zimbabwe as Munya argued, the valley of death extends from the $0-$50K funding stage as there is a scarcity of funds. By approaching Grow VC and other innovative VC firms that are sprouting around Africa entrepreneurs need not fear walking in the valley of death.

It’s important, Munya emphasised for founders to prepare for all manner of criteria in winning approval from investors and the whole due diligence and valuation exercise can take months to complete. However, for start-ups seeking fairly small amounts like US$5,000 the valuation exercise can be fairly quick.

A key concern for local developers the protection of Intellectual Property not just on the Grow VC platform but also in the whole venture funding process. Jumpstarters had varied views on this point and it certainly provided for animated discussion.

For entrepreneurs interested in contacting Munya these are his contact details: email: munya(at)growvc.com ; Tel: +263 777 627 049

For pictures of the event check our facebook page

Photo Credit: Charles Saki


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4 thoughts on “Jumpstart tackles funding for startups

  1. A key concern for local developers the protection of Intellectual
    Property not just on the Grow VC platform but also in the whole venture
    funding process.

    This “concern” has got to be a joke.

    There is nothing protectable about many business ideas. If you launch a business with $10, people with money will immediately know the idea the moment it launches andcopy it and start their own too. Witness the many “classifieds” sites Zimbabwe has!

    I can tell you for a fact, that I myself even posted here on Techzim in a comment that i was thinking of starting a crowdfunding site (I am just too bored to look for it) (looked for it and its here: http://www.techzim.co.zw/…/crowdsourcing-gaining-momentum-in-africa/) before i even heard of this Grow VC. I certainly can launch it and will, at least i am prepared to try.

    Like i said then,

    I have a number of projects in the pipeline and many that are more interesting than that.

    and those other projects are somewhat ready for launch.

    The thing is, whatever you are working on, just assume someone is already working on it and may launch it before you, and if he does, too bad for you because first-mover status holds tremendous advantages. So if you do not have money, then what options do you have? Sit at home with your genius project or launch a fundraising blitzkrieg and be the first out with the project? To get money you will have to tell those who have it.

    Take the example of theyouth loans. many months ago, even before the youth loans came into existence, Simba Makoni said many youths are being disadvantaged by corrupt bank officials who go on to steal the applicant’s ideas and give the loan to their relative who will start the project. So when you send your business plan, someone will read it and many bankers are not tech savvy so they can send the project for vetting by their IT guy.

    The least you can do is get people to sign a non-disclosure agreement which will have a non-compete clause in it – say over 2 years. If that is too much in your opinion, then do what i do, leave out some critical technical success factors. Dont go into too much detail such that someone will be able to start a similar project with your “blue prints” An example of this can be say Anglo American and its Unki mine in Zimbabwe. Anglo can send a business plan detailing how much platinum will be sold etc etc. It may never reveal that the buyer of all that platinum will be its Anglo Platinum SA subsidiary for example. So if some idiot, even in a bank, were to copy the business plan, he would not succeed because Anglo knows where to and how revenues will be achieved. Another example is Anglo not mentioning that it has patents for the extraction process so someone who steals the idea will not be able to replicate it.

    Point; dont put too much detail in business plans.

    About 2 weeks ago, i presented a project to one big entrepreneur here in my city. His managers all understood what i was talking about and they were satisfied. He invited his IT guy to sit in the meeting. Then after answering all the IT guy’s questions the IT guy said “we can have it done for US$250”. I immediately told the IT guy, in the presence of the big entrepreneur, that if they can do it for $250 they can do it and i may as well close my laptop and leave. (I know they cannot. it is impossible!)

    There are some people who will pretend to be interested while stealing your idea or information from them.

    Anyway, my secret was never to reveal critical information and i did not care if they were not interested. Secondly, i have other massive back up systems which they do not.

    Sadly this is becoming too long.

    I would urge anyone to read about Sabheer Bhatia of Hotmail and what his approach to VCs was like. Basically, the guy approached VCs speaking about one thing and if they showed interest, would then tell them about Hotmail, like talking about “classifieds’ and then if VCs show interest in that, pull out your iron glove and tell them about Hotmail, your hotter and even hottest venture.

    1. Thank you for a well thought response Prosper. Indeed I think part of the ‘opposing’ view in the IP debate related to most of what you have highlighted. Also witness the raging debate around software patents in the US. The concern for entrepreneurs was that once they post their idea on the Grow VC platform is there any protection from bogus investors who are simply there to harvest ideas. Ultimately the best defence is for founders to be smart in who they deal with, what information they reveal (i.e build a relationship of mutual trust before making key disclosures) etc. Software is easy to replicate once you have an idea of what it does so so the best defense against real and potential threats is constant innovation. Trade secrets tend to be better at securing your idea than patents or NDA’s (besides no VC will sign an NDA)

  2. i like the way people want to die with their so called “brilliant” ideas for fear fear of having someone steal it. go ahead and do it.. the probability that someone is doing it somewhere or about to launch it is high. go ahead and do it

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