Giving SMEs a helping hand

Mr Dave Oketch, founder of Sare Millers consults with business angel Johnni Kjlelsgaard during training. PHOTO | KINUTHIA MBURU |

What you need to know:

  • So far, over 20 small and medium businesses have benefited from GrowthAfrica.
  • As Money found out, there’s no limit to the kind of businesses that are currently under GrowthAfrica.

Arghan Joshua had always wished to start a renewable energy firm.

His dream came true in 2008 when he founded Continental Renewable Energy Company and began to deal with waste management, making composite, roofing tiles, and fencing posts from recycled plastic waste.

However, to set the company on a growth path, he needed to attract angel investors.

He turned to GrowthAfrica, a small and medium businesses accelerator to pitch his business, gain exposure and access money.

Well, six years down the line, his decision has paid off.

“My business was struggling to attract investors. But the exposure that has come participating at GrowthAfrica has been immense. So far, my business has managed to get Sh4.5 million in funding,” he said.

He is not the only one who has enjoyed the helping hand of a business angel.

In 2012, Catherine Mahugu, Gwendolyn Floyd and Ella Peinovich came together to form Shop Soko, an online fashion and jewellery store.

To attain their goal of connecting online consumers to global jewellery makers as well as semi urban and rural artisans, they pitched their idea at GrowthAfrica and began their journey to success.

The funding accessed by these two businesses is the brainchild of Johnni Kjelsgaard, a local entrepreneur and angel investor.

ACCELERATOR

Nonetheless, it has been a long journey for Mr Kjelsgaard to establishing a local version of the popular Shark Tank — an American reality competition that features aspiring entrepreneurs making business presentations to a panel of potential investors.

After founding Metrocomia, an internet firm in 1998, Mr Kjelsgaard decided to change his dance and start a startups’ accelerator company.

Together with Patricia Jumi, they founded GrowthAfrica Capital in 2007 and began sourcing and lending money to small and medium businesses.

By 2011, they had over 1,500 SMEs receiving loans of between Sh170,000 and Sh2.5 million.

In late 2011, however, they sold GrowthAfrica Capital. But in 2012, Mr Kjelsgaard started GrowthAfrica.

“My dream was to reach the aspiring startups at the bottom without funds,” he says.

“I knew there were very many aspiring businessmen and women with brilliant ideas but no money to fund them. I hoped that by starting afresh, I would achieve this goal.”

Well, his dream has come to fruition and local SMEs who’ve successfully pitched their ideas are reaping fruits.

So far, over 20 small and medium businesses have benefited from GrowthAfrica.

And as Money found out, there’s no limit to the kind of businesses that are currently under GrowthAfrica. The list ranges from poultry farms to mobile apps businesses.

Take Leah Mururi. She owns Kilimo Bora Agrovet, an outfit that trades in farm inputs.

It also offers technical knowledge to small-scale farmers dealing with horticulture and fresh produce for export.

POULTRY

Lucy Muiruri on the other hand has gone on to expand her Daluc Poultry business located in Kajiado County.

“My poultry business now entails a poultry hatchery, breeding, feed mill, and a chick processing farm that specialises in Kienyeji (indigenous) chicken,” she told Money.

“I have also started my own programme where I work with other smaller poultry farmers in rearing chicken.”

Other beneficiaries include Christine Khasina–Odero’s Super Mamas, an online platform that allows mothers to purchase and sell products for children, Judith Owiga’s jua kali mobile and web outfit that connects the youth in jua kali trade to industries and homes requiring technical assistants.

Also enjoying GrowthAfriuca’s financing and expertise is Jooist, a gaming business.

In the past 18 months, Jooist has managed to reach over 100,000 users every day with its product besides securing Sh2.2 million in funding.

In the same period, Ecofuels Kenya, which produces biodiesel and fertiliser using non-productive crops from 2,000 local farmers has attracted Sh27 million in funding, while Zana Africa has sold over 50,000 locally produced sanitary pads developed from farm waste after getting Sh90 million in investments and grants.

Similarly, 270 aspiring entrepreneurs and 82 startups have passed through GrowthAfrica.

“We invest in four main sectors,” Mr Kjelsgaard notes. “Our focus is usually on enterprises that have a positive impact on society such as provision of income to low earners or provision of innovative products and services in agriculture, health, education, manufacturing and ICT.”

According to Mr Kjelsgaard, since its establishment, GrowthAfrica has so far helped create over thousands of jobs besides injecting at least Sh360 million in small and medium local businesses.

“In the past two years alone, we have identified and trained 240 entrepreneurs and assisted their businesses to raise Sh2.8 billion through 82 social enterprises. This has come with 11,300 new jobs with 87 per cent of all these business reporting sustainable profits,” he adds.

This year, 12 agribusinesses have been accepted for funding.

HOW A STARTUP IS FUNDED

According to Mr Kjelsgaard, investment in a startup depends on the stage of the outfit or SME.

After pitching an idea successfully, a start-up is given Sh450,000 to assist it implement its business prototype within a set period of time as well as conduct a pilot survey in the market to get a proof of concept and feedback from its potential consumers.

If it pulls through successfully, the startup gets Sh9 million for expansion, growing operations, and meeting the demand in the market.

Once it shows remarkable growth going forward, the entity receives between Sh9 million and Sh27 million.

NUMEROUS OFFERS

Borrowing from popular Shark Tank show, SMEs that pitch their ideas successfully are handed numerous offers in exchange for funding.

“Some of the businesses we fund require huge amounts of capital to set off and sustain themselves into profitability. Consequently, it may be difficult for the owners to repay the money or for us to continue offering others funding.

“Hence, once we fund a business, we take up a stake in it, which is negotiable.”

In some cases though, the investments can be turned into debt if the business owner feels that he or she can repay it efficiently.

“We can also offer both equity and debt to one business based on how valuable we find it,” Mr Kjelsgaard says.

WTONG PITCH

Although nearly all SMEs would seek to be funded either by an angel investor or a bank in order to grow and expand, many get rejected.

Why? According to Mr Kjelsgaard, they fail to provide the information which investors seek.

“Many enterprises pitch the wrong ideas. No investor will throw their money into an enterprise that looks bound to fail,” he says.

“From my experience, investors will always go for a committed, skilled and knowledgeable team that portrays a broad array of competences in sales, managerial and administrative capacities of the market they are pitching and or entering.

“You must show your willingness to make personal sacrifices to grow your startup.”

Further, he cautions against over-valuation of a startup. Any angel investor will always follow up on your pitch to establish the veracity of the idea before injecting money.

“If we agree to invest in a particular business, we always do a follow up to ensure that the details are as exactly as they were pitched,” he says.