88mph, a South African accelerator program, just received backing from the local venture capital firm 4Di in a move that seeks to forge a lasting connection between African entrepreneurs and African investors.
“It is important for startups in Africa to get local investors,” said 88mph founder Kresten Buch during a Skype interview. “4Di is the first venture capital firm that has supported more deal flow here. People with money here don’t go for tech investments, but there is so much potential in the emerging market here, and less competition. 4Di is investing in 88mph because we generate opportunities for follow-on investments. We seed them and 4Di takes them forward.”
Funding is a major hurdle in the African startup economy and mentorship is not enough to get startups off the ground. While 88mph provides training and education on design, programming, and business development, offering capital is a necessary part of moving the businesses into the next stage of their lifecycle. The accelerator’s approach is to make a large number of small investments, creating a more robust environment for entrepreneurs and investors alike.
Buch said that a viable business model is crucial for portfolio companies because they cannot rely on venture capital for a runway. The goal is to release products as quickly as possible and make money within the first three months. A few years ago, this posed a significant challenge due to low levels of internet connectivity and penetration, as well as insufficient education.
However, Africa is now at the brink of a technological Renaissance. Mobile technology has totally transformed the local economy and there are a wealth of online resources to learn about computer science, design, business etc… Furthermore, the International Monetary Fund forecasts that sub-Saharan Africa will be third fastest growing region in the world in 2013 and 2014, and the international venture capital community is paying more attention to startups in emerging markets.
Buch founded 88mph in 2011 in Kenya. Since then, the program expanded into South Africa. It has made 24 investments adding up to over $1 million and claims to be Africa’s most active seed fund. Buch is a serial entrepreneur with over 15 years of experience (and multiple exits) in Europe and Africa. He met Justin Stanford, a cofounder and general partner of 4Di through their involvement with Google Entrepreneurs, a program where Google partners with tech hubs across Africa to provide coworking space, training opportunities, and host events and workshops. Google also provides technical content, business tools, and infrastructure upgrades.
While Google helps sooth technical growing pains, 4Di’s seeks to sooth financial ones. 4Di targets investment opportunities with high growth potential in the seed and early-stages in the relatively under-serviced mobile, enterprise software and web start-up markets in Southern Africa. Stanford also founded the Silicon Cape Initiative, which seeks to elevate Cape Town’s position as a hub for IT innovation and entrepreneurship. Both are dedicated to nurturing the local ecosystem.
According to Katie Sarro, 88mph’s brand strategist, its startups have serviced 100,000 customers and have generated over 100 jobs in Africa. The most recent batch of portfolio companies include map, payment, and transportation solutions, as well as tools to manage electricity consumption and property online and an extreme sports booking service. The unifying theme is they are companies founded by African entrepreneurs geared towards the African market, and now, backed by African money.