The Entrepreneurs I Met in Uganda and Kenya

December 30, 2010

(If you haven’t yet read my last post on investing in Africa you can read it here)

The Journey to East Africa

I left my parents’ home in Bradenton, Florida on Sunday afternoon and after a 30 hour journey through Tampa, snowy-D.C. and Istanbul, Turkey I arrived at 2:15am Tuesday at Entebbe International Airport in Uganda. I was so happy to be back in Africa for the third time.

I got through immigration and customs and by 3am came out of the arrivals area at Entebbe to meet Roey Rosenblith and Abu Musuzza, two solar lighting entrepreneurs in Uganda who run VillageEnergy. They very graciously picked me up at such an early hour in the morning.

Roey and Abu have been working for a year and a half now on bringing affordable solar lighting to the 80% of homes without electricity in Uganda. They began their sales back in September 2010 after a year of R&D and production and are now rapidly building out their distribution model for their $60 home solar lighting systems.

I had invested in VillageEnergy back in January 2010 through a personal investment fund the Humanity Fund. There was much to discuss!

We jumped in Abu’s Corolla at the airport carpark and began the hour drive back to their apartment in Kampala. On the way I got an update on Village Energy’s operations. We arrived a little after four back at their place. After a quick demonstration of the VillageEnergy solar lighting system and a heated cinnamon bun (definitely not the first thing I expected to eat in Uganda), I crawled under the malaria net and fell asleep by 5am. We had a busy day ahead!

Tuesday – Kampala, Uganda

I rose at 9am and after a shower and some fresh chapatti and Kenyan tea the three of us went to the Kabira Club for a buffet breakfast.

There at the Kabira Club I met with tech entrepreneurs in a series of meetings Roey had set up.

Here’s are the entrepreneurs I met with  in Uganda.

  1. Roey Rosenblith and Abu Musuza from VillageEnergy
  2. Charles from Wifi Cloud who is starting a wimax phone routers business in Kampala
  3. Saidi Bakenya from One2Net is setting up a digital internet connection service over the TV spectrum
  4. Peter Kimuli from Carnelian who is building a micro hydro power plan in west Uganda
  5. Peter Benhur Nyeko from Benconolly Pess Ltd, who is in the bus and generator business
  6. Charles Kalema, who run a garbage and disposal business with 24 employees
  7. Dennis from Dmark Mobile, a mobile apps company with 23 employees
  8. Revence Kalibwani, a mobile app developer

Around 4:30pm we went to the Village Energy sales center to meet with their employees Aggie, Alex, Alex, and Charles. We then went to dinner at a local hotel to get feedback from the team on how to improve Village Energy.

At eight we visited Olga, a VillageEnergy customer who lives in area without electricity and has 3 VE units installed.

We capped off the night with drinks at 9:30pm at Cayenne in Kampala with Roey and Abu and their friends Simon, Jennifer, and Dennis. Dennis runs Dmark Mobile, a mobile apps company with 23 employees.

Wedneday & Thursday – Nairobi, Kenya

On Wednesday I woke up at 8am. Roey, Abu, and I drove to Entebbe to have breakfast with Revence Kalibwani, a mobile app developer. Then we went to the airport and I was off to Nairobi on Air Uganda.

Yesterday and today In Nairobi I met with:

  1. David Kuria from Iko Toilet, has 50 environmentally friendly pay toilets throughout Kenya. Has raised funds from the Acumen Fund and works with my friend Amon Anderson at Acumen.
  2. Elizabeth Myyuiyi from EcoBank Kenya to discuss SME loans and credit. Secured loans are going here for 14% per year and group guaranteed microfinance loans are at 25-30%. (Though the annual inflation here is about 9% so the real interest rates on these loans are lower).
  3. Gaita Waimuchii of NetBlue Africa, a web marketing agency, and a 21 employee travel booking company in Nairobi
  4. Ben Lyon and Dylan Higgins of KopoKopo, mobile money backend integrator, API connector between MFIs and multiple platform mobile money solutions. Ben is from FrontlineSMS and Dylan is from They’re received investment from FirstLight Ventures and Presumed Abundance to date.
  5. Jessica Colaco from iHub Nairobi, tech incubator
  6. Wiclif Otieno from Kito International, non-profit that employs street-youth in Kenya
  7. Morgan Simon, founder of Toniic Impact Investors Network

During these discussions a number of other Kenyan and East African tech firms were mentioned that I’ll have to check out.

I’ll be posting next a report and video from my time this afternoon at the iHub, the tech incubator and innovation hub here in Nairobi.

Asante Sana,

Tuesday – Kampala, UgandaIf

Why Invest in Africa?

December 30, 2010

Jambo from Nairobi Kenya!

I’m so energized. I’ve been in East Africa for the past three days visiting tech entrepreneurs and tech investors.

While I spend about 95% of my working energy focusing on building iContact into a high-growth purpose-driven business, I like to take a couple weeks each year to travel and explore what’s going on with tech companies in other parts of the world.

This week I’m in Uganda and Kenya to find investment opportunities for the Humanity Fund, a personal investment fund I have for investing in African and American tech companies.

Why Invest in Africa?

There is so much economic opportunity in Africa, support for IT investment, and entrepreneurial energy. There’s an opportunity to make a lot of money investing in great companies while creating lots of jobs and doing a lot of good at the same time.

Africa is the least developed continent in the world. There are 1.03 billion people in Africa. Of this 1 billion (source) 65% of Africans live on under $2 per day (source) and 59% of African households do not have electricity (source),  and the number increases to 69% if you only look at Sub-Saharan Africa.

But Africa is no longer about famine, poverty, and war. That was the Africa of the 20th century. The 21st century Africa is about opportunity, technology, and entrepreneurship.

You may read about Sudan, Somalia, Zimbabwe, Eastern Congo, and the Ivory Coast in the New York Times and hear about these countries on the nightly news. But these are only five of the 54 countries in Africa.

The real, untold, narrative of Africa is what’s happening in the other 49 countries. Tremendous economic growth, investment, and rapidly rising living standards. What happened in South East Asia from 1950-2000 (rapid growth and poverty reduction) is now happening in Africa from 2000-2050. Most of the world just hasn’t realized it yet.

Why Invest in East Africa?

Here in East Africa (Kenya, Rwanda, Ethiopia, Uganda, and Tanzania) the GDP has grown at an average annual rate of 7.6% the last four years compared to just 0.5% for the USA. Africa will be the economic lion of the 21st century as McKinsey proclaimed in their July Report, “Lions on the Move: The Progress and Potential of African Economies.”

Take a look at these average annual GDP growth rates for 2006-2009 from the World Bank Development Indicators GDP database.

  • Uganda: 8.75%
  • Rwanda: 7.925%
  • Kenya: 4.375%
  • Ethiopia: 10.45%
  • Tanzania: 6.675%
  • USA: 0.5%

Uganda was the first country I came to in Africa back in 2008 and so I decided to start investing here in East Africa and expand later. I hope someday to run a fund making investments in high-growth socially responsible companies all over the developing world.

Investing As a Way of Making a Positive Impact

This is my third time in East Africa. When I came for the first time in 2008, I held the view that the way to best make positive change was to give money away to NGOs and non-profits.

I come now with the perspective that it takes all three sectors of society (government, non-profits, and for-profits) working effectively to create sustainable economic growth and that the private sector has a huge power to make positive change in the world.

The best way I believe I can contribute to positive change is to help high-growth companies that are creating jobs expand and create more jobs. At the end of the day, the cause of poverty is a lack of jobs and productive capital. Low education, low health care, and low nutrition are the symptoms of poverty, not the causes. If you increase someone’s income they can afford better education, health care, and food for their family.

So now, I believe the best way I can use my experience and resources to make an impact in reducing extreme poverty is to invest in high-growth companies that are creating jobs in developing world.

What I’m best at is figuring out how to grow technology and internet companies. Over the next two years I hope to invest in about ten more privately owned high growth African tech companies as part of dipping my feet into the water and beginning to create a model for eventually building a private equity fund some years down the road.

I hope to be able to eventually show that it is very possible to build a microequity investment firm that gets above market returns investing in high growth socially responsible companies in the developing world.

The field of impact investing is developing rapidly and I’m glad to slowly be learning about it. To learn more check out this Impact Investing Primer from the Rockefeller Foundation and this one from the Federal Reserve Bank of San Francisco.

Existing VC Funds in Africa

In my time here and in talking to people at the Skoll World Forum in April I’ve come across the following funds that are actively making venture capital investments in tech companies in Africa.

  1. InReturn Capital
  2. BusinessPartners Kenya
  3. TBL Mirror Fund
  4. eVA Fund
  5. Flow Equity
  6. FirstLight Ventures
  7. Humanity Fund
  8. Fanisi
  9. Grassroots Business Fund (non-profit fund)
  10. Acumen Fund (non-profit fund)
  11. RootCapital (non-profit fund)

A more extensive list can be found on the African Venture Capital Association (AVCA) web site. Other resources include the VC4Africa and BiD Network

How You Can Invest in Africa

If you want to invest in private African companies, then you could contact the above VC funds and express interest in investing as a limited partner in their next fund. They will likely require you to be an accredited investor and be able to invest $100,000 and up. You can also find private companies yourself and invest in them directly or join an angel network that invests in African start-ups like Toniic.

If you want to dip your toes into the water of investing in African companies without putting tens or hundreds of thousands of dollars at risk, you can invest directly into publicly traded African companies. There are even Exchange Traded Funds (ETFs) that allow you to get index-fund like exposure to African markets. You can invest as little as $75 in these funds through your broker or your TD Ameritrade, E*Trade, or Scottrade account and participate in the growth of the African economy.

You may want to check out:

  • AFK – The Market Vectors Africa Index ETF seeks to replicate the performance of the Dow Jones Africa Titans 50 Index. The fund represents a broad range of sectors and African countries, including exposure to some less traditional, frontier markets. Up 23% in 2010.
  • GAF – SPDR S&P Emerging Middle East & Africa ETF. Seeks to closely match the returns and characteristics of the total return performance of the S&P/Citigroup BMI Middle East & Africa Index. Up 22% in 2010.
  • EZA – South African ETF, up 29% in 2010.

You can also call your broker and ask them to invest directly in publicly listed firms on the Ugandan Securities Exchange or the Nairobi Stock Exchange.

For proper disclosure, as of this writing I do not own any of these ETFs but might in the future. I am definitely not a qualified securities advisor in any way and past performance is not necessarily indicative of future performance.

Thanks for reading. I hope you enjoyed this post! Please share and comment.

Next, I’ll be posting about the entrepreneurs I’ve met in my first three days here in Africa…

- Ryan, Nairobi, 30.12.10

Brette Simon on Legal Issues for VC Backed Firms

June 18, 2010

Session 5, Brette Simon on Legal Issues for VC Backed Firms
EO/MIT Entrepreneurial Masters Program
Year Two, June 18, 2010

Brette Simon of Jones Day is talking about legal issues for VC backed firms. She did a great job and this was a really good refresher. Here are my notes from the session…

Part IDos and Don’t for VC Backed Companies
(or Companies that want to be Venture Backed)

Not having these things buttoned up can cause investors to not want to invest or provide lower valuations.

  1. Shareholder Agreement – Have a shareholders agreement (buy/sell agreement)
  2. Corporate Records - Maintain corporate records (make sure you keep Board meeting records, Board approvals, a copy of stock certificates)
  3. Board Minutes - If you hold a Board meeting, take minutes, put the minutes in the record book
  4. Shareholder Loans - If you loan money to shareholders, paper them (interest rate, amount, maturity date)
  5. Buy-back rights - Make sure the company has the right to buy back options or restricted stock if they leave the company (repurchase right).
  6. Series of Shares - Minimize the number of series of shares (Series A-H might scare investors)
  7. Types of Options – There are Incentive Stock Options and Non-Qualified Stock Options. Each has different tax treatment.
  8. Phantom Stock – Consider using Phantom Stock – gives economic value without giving away voting rights (no exercise price and can be better than options as easier to exercise prior to liquidity event)
  9. Intellectual Property Protection – use proprietary information and assignment of inventions agreement to ensure the company owns everything employees created. Without it being signed, original investor can come back and claim right to royalties to assets of the company. Have each employee sign when they start.
  10. Personal Expenses - Do not run your personal expenses through the business. It’s not good for investors to see. You don’t want things coming out of due diligence that don’t look right. Can allow the IRS or a creditor to pierce the corporate veil and go after shareholders individually if you co-mingle personal and business because you didn’t honor and respect the corporate entity. Travel & Entertainment line item is getting attention from IRS right now.
  11. Staff Classifications – Proper classification of overtime and 1099 contractors vs. employees. If you’re controlling what time folks show up and they’re working 40 hrs/week, likely need to be treated as employees.
  12. Employee Handbook - Have an employee manual and handbook that sets forth the rules and regulations and protocols, and have it signed by each employee. Have each new hire verify in writing they have not taken any IP from their former employer.
  13. Termination Release – When employees leave/quit/are fired have them sign a release. You have to give consideration for the release (some severance).
  14. Employment Contracts – Avoid long term employment contracts (use at-will employment letter)
  15. Insurance – Get EPLI insurance (employment practice liability insurance), difference from Errors and Omissions (E&O) and Director & Officers (D&O) insurance. EPLI protects against sexual harassment claims and wrongful termination.
  16. Long-Term Contracts - avoid long term contracts without ability to terminate relatively quickly. Negotiate in 60 day termination clauses into 12 month contracts.
  17. Rights of First Refusal (ROFR) - Make sure people don’t have the right of first refusal to buy your company as this can block the sale of a business even if they are minority.
  18. Integration & Merger Clause – make sure in all your agreements. Says anything we talked about before this final agreement (oral agreements, etc.) is gone and all that matters is what is in this document.
  19. Attorney Fees – In contracts have attorney fee provision that says loser pays attorney fees in any litigation.
  20. Arbitration vs. Litigation - Benefit of arbitration is all private. Everything in a court is public. Litigation is more expensive. Arbitrators tend to split the baby and meet in the middle. ‘Mediation’ can be good to put in document prior to binding arbitration, which is non-binding and less expensive.
  21. Financial Reporting Systems – critical for investors. A good controller or CFOs is worth their weight in gold. Investors what to know revenue and profit data broken out as much as possible (by product, region, SKU, etc.). You need to close your books once per year and give monthly data. Clean up your old bad receivables.
  22. Audits – Investors preferred audited financials once the company reaches any scale (>$1M/yr in revenue). Can cost around $15k-$30k. If you don’t have audited financials, need really solid CFO. Without these investors will look for things that are wrong and give a haircut to the price. Minimize reasons investors can haircut valuation.
  23. SAS 115 letter – Make sure the auditor gives you this after audit if you do one to tell you about your financial controls (aka management letter)
  24. Management Team & Succession Planning – The company needs to be able to succeed without you. Make yourself irrelevant over time. Don’t have ‘founderitis’ where it is all you that has the operational control or critical sales relationships. Try leaving for 3 weeks and see what happens.
  25. Customer Concentration – Make sure your largest customer is no more than 20% of your total revenue to reduce investor concern. Particularly of concern to a financial buyer who raises debt to buy your business. They lever the acquisition using debt capital. Not as concerned to a strategic buyer.

Part II – Raising Capital

  1. Friends and family round – often sell common stock to instead of preferred stock. Likely the only money you can get pre-prototype when you’re just getting started. If you can self-finance through this stage, do it.
  2. Angel/seed round – Between $25k and $500k. Invest at early stage.
  3. VCs – Invest sometimes pre-revenue but usually when firm is generating $500k-$50M of annual revenue.
  4. Private Equity – Investing in companies at a later stage when they have positive EBITDA. Looking for $2M+ annual EBITDA. PE firms use debt. In an Leveraged Buy Out (LBO), put in as little equity as possible and as much debt as possible.
  5. Types of stock – Common stock and preferred stock. Investors get preferred stock usually.

Key VC Terms

Work to get multiple term sheets at the same time so you have much more leverage in the negotiation. Run a disciplined process with a target timeline for each stage and give investors who express interest a target date for receiving term sheets so you get them close to the same time (same day ideally and definitely same week) and can negotiate.

  1. Participating preferred – Double-dipping for investors and very anti-entrepreneur. Investors get all their money back first then participate equally in the upside. Avoid in term sheets if possible and look for ’straight preferred’ (aka ‘vanilla preferred’). If you have to do participating preferred, say OK but cap it at 3x or 4x return and leave the rest to the common.
  2. Liquidation preferences – Also avoid liquidation preferences above 1x.
  3. Dividends – Sometimes there are dividends (~8%) in preferred stock that compound and accrue. Avoid this if possible.
  4. Anti-dilution protection – Comes into play when in a down round. Better to have a weighted average than a full-ratchet anti-dilution protection. Full-ratchet would give investor shares at the new lower price instead of something in the middle. Broadbased weighted average better than the narrow base for the entrepreneur.
  5. Mandatory Redemption – Forces company to buy-out investors shares at some point in the future.
  6. Right of First Refusal – If you are trying to sell your shares to someone else, the investor has the first right to buy those shares.
  7. Right of First Offer – If you issue new shares in a future round, the original investor has the right to buy in pro-rata to maintain their ownership percentage. You can put in a play-to-play position to flip on head and require investor to invest pro-rate or they may lose rights (like convert their shares to common).
  8. Investor Rights Agreement - Says that investors can force an IPO
  9. Board Composition - Usually investors will have seat on Board. Initially shoot for 3 person board with 2 internally members (founders or CEO/CFO) and investor. If have to go to 5 person board with 2 internal, 2 investors, and 1 independent nominated by common shareholders.
  10. Drag Along Rights – Helps investors get out if they are the majority shareholder. Investors have an end-game. In 3-5 years they usually want to be out. This is a right that enables majority shareholder to force minority shareholder to allow the sale of the company.
  11. Reverse Vesting – Investors can unvest shares you already own and force you to vest shares over additional years. A customary term, be aware of it.

Stages of raising capital (4-6 months)

Adding this in from my own experience. Brette only mentioned this timeline lightly. This is for running a competitive process and getting multiple term sheets, which is ideal but not always possible.

  1. Decide whether to hire an investment banker or not to help raise the funds (usually costs 4-5% of the funds raised). Usually best to do yourself if early stage. Investors prefer non-ibanked deals. Investment banks can help a lot if later stage (post $25M in annual revenue) or if raising large round of more than $20M.
  2. Create executive summary (3-4 pages) and teaser deck (~25 slides)
  3. Determine firms who would be good investors
  4. Reach outs with teaser/exec summary
  5. Schedule calls with investors who are interested
  6. Schedule meetings (at their office usually or on-site at your office for later stage firms)
  7. Ask for indications of interest
  8. Execute NDAs/Confidentiality Agreements if later stage. Make sure you can assign/transfer NDAs to any buyer of your business. Early stage investors often won’t sign NDAs.
  9. Allow access to data room of initial diligence materials if there is one
  10. Set date target for receiving term sheets with interested parties
  11. Receive term sheets. Get them to be as detailed as possible.
  12. Negotiate term sheets
  13. Sign term sheet with investor you select, go exclusive with them
  14. Complete final diligence items (30-45 days ideally)
  15. Sign final documents
  16. Get funds wired

Recommendation reading on investing is book Growth Company Guide 4.0 by Clinton Richardson. Remember the specific person who will be joining your board is just as important as the firm itself.


If you’re considering selling the company, recommended to hire an investment banker to help you focus on running the business and making sure the results come in. They know what market terms on. They do it for a living. They help create an auction process. You’ll usually pay between 2%-5% of the sale price to the banker. Get a lawyer involved to help.


  • Restricted Stock Units (RSUs) vs. Options
  • 83(b) elections
  • When you exercise Incentive Stock Options (ISOs), when do you pay cap gains and when do you pay ordinary income tax?
  • When is Alternative Minimum Tax (AMT) triggered?