On the other side of the door, four people sit at the foot of a well-lit stage, listening and taking notes. Another young man is explaining to them how his location-based find-a-handyman app works.
Users choose what service they need, such as plumbing, electrical maintenance or package delivery, and the app returns a list of names and numbers of available personnel in the order of who is closest to their location.
The judging panel almost always has one or two people from the product development or research and development department of an international tech company, a new media/techpreneur evangelist, and a successful entrepreneur of some sort.
Pitching competitions
This is the scenario in most pitching competitions and start-up meet ups where entrepreneurs get to showcase their ideas in the hope of getting much-needed funding that will enable them take their product or service to the next level.
Pitching competitions have been a major component of Kenya’s growing start-up ecosystem, where companies like Chamasoft, M-Farm and Toto Health have received millions of shillings in prize money, support and mentorship.
This calendar year alone, Nairobi’s entrepreneurs have battled it out for seed and early stage financing in at least eight such events, including the recent Global Entrepreneurship Summit (GES).
While pitching competitions have been invaluable in discovering new ideas, talents, partnerships and funding, the model has been criticised. Some of the reasons for this include that it encourages the dominance of a few names and companies, tends to encourage developers to build solutions that will impress judges, and forgets about the start-ups and ideas that have potential but did not make it to the shortlist.
Village Capital, Nairobi’s newest venture capital fund, is hoping to make viral a new form of evaluating the potential success of start-ups and solve some of the shortcomings in the traditional model.
A brainchild of venture capitalist Ross Baird, Village Capital sources, trains and invests in early stage ventures using a peer-based evaluation model to determine who among the applicants gets what kind of funding.
In the peer-based model, entrepreneurs present their ideas to a team of judges made up of fellow entrepreneurs, who then give feedback and determine the eventual winners.
“We believe entrepreneurs are the best judge of what works and what does not,” said Mr Baird.
“Peer selection is a model that has been proven to work, and we do not sit there and tell the entrepreneurs that we know everything and have a clear picture of what can work and what can’t.
“Instead, we want to be a guide and our team is made up of investors themselves, and the entrepreneurs are our investment committee, who tell us where to put our money.”
Since its establishment in 2009, the Washington-based fund has supported 450 ventures in 30 programmes across nine countries, and raised more than $100 million (Sh10.5 billion) in follow-on capital.
Two months ago, Village Capital awarded more than $100,000 (Sh10.5 million) to two start-ups: Rwanda’s Atikus Insurance, which uses technology risk solutions to expand access to credit; and Ghana’s Farmerline, an information portal for farmers.
“Most of our entrepreneurs have an idea that is working on a small scale,” said Baird.
“We help them develop business plans and business models that take this from pilot to scale. We also help them identify and segment who their clients are, and give them access to our network of investors, in addition to putting money in their ideas ourselves.”
Capital injection
The ranking criteria is done across several yardsticks to evaluate the capability of the team to execute what they are presenting. Judges look at the viability of the product, potential customer base, potential for sustainable cash flow, scalability and return on investment.
At the GES this year, Village Capital announced a $13 million (Sh1.4 billion) partnership to scale up its programme to reach more early stage start-ups in the region.
The deal will see the fund inject capital in at least 20 start-ups in East Africa over the next five years, with financing from the Chase Foundation, Chilton Capital Management, Sorenson Impact Foundation and the United States’ aid agency, USAid.
Through the peer-review model, Village Capital hopes to introduce a paradigm shift in how start-ups in the country are evaluated.
There is, however, concern as to how fair peer-review rankings are, and the possibility of collusion among entrepreneurs to alter results. To mitigate this, the fund encourages transparency by ensuring teams do not self-rank, and that members evaluate each other face-to-face and justify their scores.
Last month, the fund kicked off another round of its peer-review accelerator programme, this time targeting hardware developers.
In partnership with hardware accelerator Gearbox, the programme will see 12 start-ups across Africa battle it out for the chance to access $100,000 in financing, which will be shared by the final two.
fsunday@standardmedia.co.ke
