ICTworks by Inveneo

It’s well known that there’s a problem with seed capital in Africa and Cameroon is no exception. We’ve spoken with many enterprising young hackers who’ve found that funds were simply unavailable or local investors demanded absurdly high equity stakes in their businesses—at times as much as 60-80%.

Limbe Labs seed capital

At Limbe Labs Ventures, we concentrate on seed funding in the range of $5,000 - $20,000. In return, we take an equity stake in the range of 5-10%, depending on the level of risk.

We help startups share the risks of investments - we earn when you earn, we lose when you lose. We’re flexible - there is no standard package and additional finance can be provided.

Private equity investments have no guarantee for the investor, so we focus on the credibility of the founder and the quality of the business idea to make our investment decisions. Our investments are accompanied with the full assistance (or as much as needed) of a business incubator - specific resources and assistance can be provided as required.

Our preferred exit strategies

Every investor wants to see an exit. Our goal is to exit within 2-5 years. Here are the three ways we can exit a startup (most common to least common):

1. We sell the shares to the shareholders
2. We sell the shares to a reputable person or company in the market who has extensive knowledge of the industry
3. We bring your company to the stock market, sell shares to external investors (IPO). 20 years ago there were only a handful of African stock exchanges. Today there are 16.

Alternate funding structures

Limbe Labs does not necessarily take an equity stake in the companies we fund. We recognize that founders are unique, as are their business ideas and capital needs. Therefore, we make use of a flexible range of investment tools. One is project work in exchange for seed capital.

Startup founders are matched to a commercial software project of an appropriate size (1-3 months), they are paid a high monthly salary while gaining valuable experience doing client work, and receive a lump sum payment at project completion, providing them with enough capital to bootstrap a business venture.

This post is part of the presentation, "Can An African Tech Entrepreneur Change the World?"

Last week I attended the much anticipated iHub Nairobi launch, as well as participated in a pre-launch gathering of African tech hub pioneers (more on the latter in a follow-up post). A number of bloggers in Kenya and elsewhere have already covered the iHub event much better than I could have.

The event was aptly described as “Geek Heaven” with a broad cross section of techies, entrepreneurs, university students, journalists, hackers, financiers, researchers and digirati all converging on the top floor space overlooking the Nairobi skyline.

I later told Erik, half-jokingly, that you couldn’t swing a dead cat without hitting half a dozen TED Fellows as well.

Long before the March 3rd iHub launch, it became clear that something truly unique was taking shape here. Too often, young African software engineers, designers, researchers and innovative thinkers (often referred to as the “Cheetah generation”) labor in isolation and with limited resources, working on the same or similar problems that someone else, somewhere has likely already solved. Just as important, others may be venturing down a path filled with insurmountable obstacles and dead ends.

The idea behind the iHub - and other new technology labs cropping up across Sub-Saharan Africa - is to put a group of exceptionally smart “doers” under one roof, provide them with a top notch work environment, generate ideas at a rapid pace, filter out the dead ends, present the best candidates to investors and produce viable businesses (and success stories) along the way. The end goal isn’t to generate wild profits for the iHub itself under an exclusive brand, but rather to grow a stronger technology community that hackers, researchers, policymakers and VCs are naturally drawn to.

iHub opening party

It’s not a far-fetched idea that world class products and services can grow out of a place like the iHub. Africa is a continent renowned for innovations conceived and built from limited resources. Countless examples exist of indigenous technologies borne from constraints that have led to hugely successful solutions. Among them is M-Pesa, Kenya’s popular mobile banking and payment system, whose model has only recently been prototyped in the West.

Likewise, witness how Ushahidi, an open source software effort conceived in the wake of Kenya’s 2008 post-election violence has elevated Africa’s global tech status and attracted worldwide acclaim for its rapid deployments in conflict and crisis zones such as the DRC, Gaza, Haiti and Chile, as well as serving as an invaluable tool for election monitoring. Even Washington DC has Kenya to thank for the part it played in cleaning up after Snowmageddon.

When the “Why I blog about Africa” meme made the rounds of the blogosphere awhile back, I mentioned the spirit of innovation and entrepreneurship I observed in Cameroon and elsewhere on the continent. I made reference to bearing witness to “an African Renaissance” fueled by ICT and led by a young generation of idealists.

It’s an open secret now that the African Renaissance is already in its early stages. The continent is undergoing a period of rapid transformation due in part to increasingly faster and cheaper bandwidth which is being utilized by young Africans armed with laptops, smart phones and bright ideas.

This video, produced by the iHub’s neighbors the 1Percent Club in the iLab, captures some of the buzz and creativity on the ground in Nairobi:

We’ve observed the same enthusiasm and immense potential for open collaboration in our coworking and incubation space at Limbe Labs. Ideas get cross-pollinated, professional networking occurs spontaneously and businesses are accelerated at a faster pace.

In a follow-up post, I’ll discuss some ideas brainstormed in Nairobi for how this emergent tech hub network can better support African entrepreneurs.

Why Open Collaboration Spaces like the *iHub_ Matter was originally published on 27months