Technology gurus and other innovations enthusiasts have tipped African start-ups in the sector on ideals to ensure a realistic venture.
The youngsters were tipped, last week, at a parallel conference to the Transform Africa 2013 Summit.
The youth involved in ICT in various capacities met at Hotel Des Mille Collines to deliberate on issues they face and brainstormed and shared experiences on how to get through them.
Access to finance being a challenge most start-ups and ICT companies face, dominated most of the forum with panelists, including seasoned chief executives and a chief investment officer of a venture capital firm, giving tips on various sources of finance.
Paul McConnell, the chairperson of Axiom Networks, an Australian ICT solutions firm with a presence in several countries, explained the importance of presenting a lucrative business plan to potential investors.
“An easy sign of how well your business will do is how easy it is for you to raise capital for it. Investors want to see sustainability and the profitability of the venture before they can commit their money on your project. This goes down to the plan of action you present,” he told them.
McConnell went on to propose alternative sources of capital new firms could look out for. “Get your initial funds from savings, friends and family because you will retain your equity which you will need much later when you are more successful and looking to work with venture capitalists. These sources (family and friends) don’t care much about returns.”
Eric Rutabana, the chief investment officer of Business Partner Network, a venture capital firm, explained why such firms mostly work with established enterprises that have demonstrated success previously and not emerging enterprises.
“Venture capitalists and banks may be hesitant to fund new firms or start-ups because they have little experience,” Rutabana said.
“According to research by the Private Sector Federation in 2011, on the success rate of start-ups in the country, it was established that 82 per cent of them close up in their first year of operation. That explains why we mostly look out for mature enterprises because we are in business. We look out for entrepreneurs who have skills, Experience and are knowledgeable in the field.”
He urged entrepreneurs to work with the available sources of income to have a revenue stream before they can approach investors.
Jeff Gasana, a young Rwandan entrepreneur who founded SMS Media, a firm with a presence in more than 20 African countries, shared his personal experience on how he has been able to build his firm from savings and how to deal with financiers.
“At times you have to choose between giving a part of your company to financiers and getting loans which you pay at step rates,” Gasana said.
He cautioned entrepreneurs against working with investors who have little or no knowledge of an industry.
“You are at times approached by investors with money who are only looking for financial security and have no understanding on how the industry works; such investors mostly ask for unrealistic returns,” said Gasana.
Another concern raised at the forum was how technology innovation hubs all over the continent can cooperate to build skills of their members and increase markets for their members’ innovations and solutions.
“With over hundred innovation labs all over Africa, we are looking to see how we can use that to the advantage of our members by having launches of solutions streamed in all the labs during the launch.
Other partnerships in discussion are how members of various technology hubs can get access to labs all over the countries and even create a platform where skills can be shared,” Markos Lemma, the coordinator of Iceaddis, a technology hub in Ethiopia, said.
Tech start-ups tipped on competitive business plans