eVA Fund: Directing Investment to sub-Saharan Tech Start-Ups

Information and Communication Technologies (ICT) has long been identified as a key aspect of African economies that was necessary to fulfill development objectives. But, what if the ICT sector in Africa was not merely a supplement to development efforts, what if it was forging tech innovations that could see the next Apple or Microsoft emerge from the continent? We have seen how African entrepreneurs breathed new life into the simple cell phone, and many believe there is more to come.

eVentures Africa (eVA) Fund – a venture capital fund that has been at the forefront of ICT investment in sub-Saharan Africa – believes that ICT in Africa will not only produce innovation and a highly skilled workforce in Africa, but also that this will translate into a credible profit for its investors in Europe.

In our interview, Vincent Kouwenhoven – Founder & Fund Manager of eVA Fund, describes the implications of ICT development in Africa as well as describing an ideal technology start-up.

Tell us about eVentures Africa Fund?

eVA Fund is the first Venture Capital (VC) fund dedicated to ICT/Digital Media companies in sub-Saharan Africa.

Founded in 2010, by entrepreneurs with a strong track record in Digital Media, and with a passion to actively support entrepreneurship in Africa, thus far, eVA has invested in 7 startups, 4 on Kenya, 1 in Ghana and 2 in South Africa.

The ICT sector in Africa at present is exciting, but what makes the environment there so vibrant that you have chosen to form a company dedicated to investment in technology there, as opposed to any other region around the world?

After running a VC firm – also dedicated to ICT in Europe – I took a sabbatical in 2009 and focused on Africa. During that year I noticed 3 driving factors which could play a major role in ‘bridging the digital divide’:

1. the planned roll out of the sea-cables, providing Africa with massive – and affordable – bandwidth,
2. The massive uptake of cellphones all over Africa and,
3. The ‘return of the cheetahs’; well educated native Africans, returning to the continent after having studied and worked in the West (predominantly US, Canada and UK) starting up companies in the digital space.

What has been the major catalyst for innovation in the African ICT sector? Has it been a result of entrepreneurship? Or a result of smart government policies?

I guess the availability of the web itself is the key determining factor in this space. There has always been entrepreneurship in Africa, but the web is providing a major boost in the potential for people to start businesses, with less starting capital, and enabling to reach (mass) markets in short time.

Also, the web is appearing to enable knowledge dispersion, all over Africa. eLearning and self-education all get a boost. Apart from that, its certainly the case that in some countries, i.e. Kenya, the Government has developed great incentive programs to actively promote entrepreneurship in this space.

What financial products do eVentures Africa offers to SMEs? Does it have a range specifically targeted at those in the ICT sector?

The essence of VC is that you provide capital in exchange for shares in the company. Ideally this capital is used to grow the company for let’s say the first 3-4 years, after which – as a VC – you sell your shares towards another party, who can help the company grow even further, after the high risk of the first years has been covered.

Having said that, eVA does go way further then just providing capital. We try to actively coach our investee-companies in growing their business together. This implies almost always weekly Skype-sessions, as well as (bi) monthly face-to-face meetings with the entrepreneurs, actively assisting them on all aspects of their companies, from technology to organization and strategy.

Furthermore we are constantly seeking synergies between our investee companies in the portfolio. For expample software developed for a company in South Africa, might be re-used by a company in Kenya, or they could offer pan-African solutions working together.

Can you highlight an ICT project that eVentures has invested in, that produced both impact and profit? 

Whenever we decide to invest in African companies, the starting issue is, if they are offering African solutions for African issues. That is a very important starting point in terms of impact already.

The deliberate choice to invest and require profitability, to us means, a stronger way to guarantee continuity. It’s not the profit in itself that is key, but the chances for companies to continue to grow, and thus create more (highly skilled) jobs, which has an even bigger impact.

Those criteria are applicable to all our investments so far, but a nice example is our last investment in Nomanini. This South African based company has developed a wireless terminal by which airtime-vouchers can be sold. As you will know, mobile operators still show tremendous growth all over Africa, and the operators require lots of distribution points to sell airtime. By launching a wireless terminal, anybody could become an airtime seller. These terminals are – as we speak – spreading all over South Africa in small spaza-hops, and even market-stalls, in taxis and matatus, providing many small entrepreneurs with an extra income by means of a commission on airtime sold. A great innovative technology, with a great impact in terms of generating extra income for people without the means to setup ‘telephony shops’.

Does innovation differ geographically in Africa? For example, do you see development of one technology in Liberia that you would not see as much in Burundi or Rwanda?

With eVA Fund we’re always looking at companies that already have some traction in their own country, but need the funds to expand in their region (east, west or southern Africa) first, but preferably become pan-African providers at a later stage. In general I would state that the technologies used have a pan-African – and sometimes even global potential. Like Mpesa from Kenya, is now often being seen as a typical African technology that could be used as an example for mobile payments worldwide.

What do aspiring ICT entrepreneurs need to do to separate them from the rest? What does your ideal investee company look like?

We see too many ‘ideas’, literally hundreds per year, that lack enough substance in terms of the actual market-demand.

Ideally, entrepreneurs that want to become active in this field and approach us for venture capital, already have a proven technology, as well as a clear proof of market demand for their services. Also, strong teams which combine ‘techies’ with experienced business-sense are a winning combination.

What trends do you expect to see in the African ICT sector in the next 5 years?

If you look at the present growth in uptake of internet access, especially mobile internet, all over Africa, we are still at the early stages of a major boom. I truly believe that internet access spread over Africa will enable major improvements in all kinds of areas: elearning, ehealth, ecommerce, egovernance etc, which in itself  will led to a far greater and faster development then the traditional focus on agriculture etc.

This interview is part of the ICT Challenge series on business actors participating actively in the development of the ICT sector in Liberia, Rwanda, Burundi, Kosovo and Palestine. Feel free to share, comment on Twitter & Facebook. We look forward to connecting Africa’s most innovative and inspiring entrepreneurs with eVentures Africa Fund, a dedicated investment partner of the ICT Challenge.