One of the biggest challenges faced by startups in Africa is funding. This is very evident for Ugandan startups where only a handful have been able to raise funding to finance their future. Most barely try to exist living off the scraps directors can spare from their full time jobs. It seems there isn’t enough money. Perhaps we are not looking in the right places.
There are a couple of avenues for a startup to raise funding but this is hinged on what stage they are at or how much they require. Early stage startups may not nearly as much as their counterparts at the growth stage which you may call scale-ups.
In Uganda, majority of startups get their funding from grants or winning competitions. Not many have explored or considered other forms of funding. One of them is angel investment.
According to Investopedia, an Angel Investor invests in small startups or entrepreneurs. Often, angel investors are among an entrepreneur’s family and friends. The capital angel investors provide may be a one-time investment to help propel the business forward or an ongoing injection of money to support and carry the company through its difficult early stages.
It is worth noting though that angel investing is classified as equity finance which means the investor takes shares (an agreed equity stake) in your business in return for providing funds to run the business. In doing this, they seek to not only provide your business with money it needs to grow but also bring their experience and knowledge to help your company achieve success. They can invest alone or as a group.
We spoke to Kenneth Legesi, from Kampala Angel Investors Network (KAIN). Kenneth has worked in various capacities across management, consulting, corporate and project finance, research, analysis and academia in Africa, Asia, Europe and the Middle East. He’s also a tutor at the Chartered Financial Analysts (CFA) program where he shares Knowledge on investment management and analysis.
KAIN is one of the flagship programmes under the Innovation Village. And it is a testament to CK Japheth‘s (Founder The Innovation Village) dream of creating an ecosystem – not just a hub. The main aim is to get Ugandans and Africans to pull resources together and develop a culture of investing in their own.
Angel investment in it’s own right is a new concept to the African continent but even newer to Uganda. Other countries already have Angel Networks in place, though not operating at the same level as Keiretsu Forum – the world’s largest Angel Investor Network – but they’re fast catching up. Take an example of Lagos Angel Network (LAN), Ghana Angel Investors Network (GAIN) etc.
KAIN is in its early stages of formulation and according to Japheth, they’re determined to take things one step at a time. The first thing they’re doing is building capacity. They have kicked off with education series for both startup owners as well as those interested in becoming Angels. The series, according to Legesi, will equip aspiring Angels with the necessary skills.
Are you ready for tommorrows session? Lets connect – learn – meet and engage with fellow entrepreneurs…. pic.twitter.com/l6BvP2thI5
— InnovationVillageKla (@InnovationVilla) April 7, 2017
Asked what they’re doing to ensure Uganda is at par with it’s peers around the continent, both Legesi and Japheth confirmed that they are keeping a close relationship with an Angel Network in Kenya as well as African Business Angel Network (ABAN). Keeping ABAN close is very vital for not only KAIN but the entire Ugandan startup eco-system, because its main goal is to aid all Angel Networks across the continent.
On what startups should do to ensure they’re ready to tap into the Angels that might arise, Legesi advised that they enroll for their education series to get acquainted with all the necessary information. To walk the talk, Kenneth has vested interests in several Ugandan startups including Xente, Amari Couriers and many more. These he bets his money on as well as offering his expertise.
Legesi also confirmed that the Angels won’t only be bringing funds on board but their expertise too. This is something very crucial for Ugandan startups as only a few get the chance of having professional mentorship. KAIN will be looking at early stage startups that do not need much in terms of funding. This means that, as an ecosystem that is just being built, we shall need Venture Capitalists as well as Angel investors with the capacity to invest in startups at growth stage.
We would also like to challenge KAIN to establish networks not only across the African continent but as far as Silicon Valley and beyond because capacity building is one of the things we need as an ecosystem.
It is not a question of whether Angel Investment is the way to go, the question is when will Ugandans pick interest in this? KAIN may not be where we want it to be right now but we are sure it will be a much needed blessing to local startups.