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Limbe Labs Seed Capital Strategy for Startup Business Success

By Bill Zimmerman on June 21, 2010

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%.

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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?

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I'm a software guy originally from Seattle, WA. I worked for 10+ years as a software engineer for Microsoft, Visio and smaller companies in the greater Pacific Northwest. During this time, I did a stint with an internet incubator at the height of the dot-com boom, and gained valuable insight into the world of venture capital, private equity and what it takes to get a technology startup off the ground. After exiting my own startup, I packed up and moved to Cameroon where I've lived for the last four years. I am the co-founder of VC4Africa and ActivSpaces, an open coworking space, innovation hub and seed-stage incubator for Cameroonian techies. Big promoter of social change and innovation in Africa.
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