Investors turn startup ideas into big business

Nicol Woodard, the CEO of Nexus Group and venture capitalist, and Heshan de Silva (right), the founder of VenCap Kenya. Photos/Courtesy 

By Sandra Chao

In Summary

• Heshan de Silva is the founder of VenCap Kenya which invests in business ideas across 15 different sectors in East Africa ranging from roads, robotics and to the hospitality sector.
• VenCap’s operating principle for startups is that they fund the business rather than the individual’s comfortable lifestyle ensuring that they have control of the finances all the way from inception to business sustainability.

Young people, not just in Kenya but Africa as a whole, have good enough business ideas that provide solutions to many challenges faced in various sectors. But many of them lack the skills and funding to turn them into successful business.

The recent regional IT conference, Demo Africa, provided an opportunity for 40 startups to pitch their ideas to investors and venture capitalists seeking to partner with “fresh blood”— enabling them to interact and find out exactly what they are looking to fund.

READ: DEMO conference set to link techies with venture capitalists

Heshan de Silva is the founder of VenCap Kenya which invests in business ideas across 15 different sectors in East Africa ranging from roads, robotics and to the hospitality sector.

The company mainly focuses on poverty eradication, investing in ideas that can target mass markets especially for people who have not had exposure to large amounts of money.

“We do not invest in registered or running businesses; we want what is inside your head. It is easier to convert and modify a business idea into a viable company,” he said.

Viable ideas

Initially the company which is founded by two New York hedge funds each at a cost of $1 billion uses a logarithm it formulated to pick the ideas which it will invest in. Entrepreneurs need not have business plans just to pitch their ideas to the company.

Based on the individual, the business idea, the market in which the idea involves and the costs to venture into the market, a panel decides whether or not to turn the idea into a business.

“Our fund never takes more than 40 per cent of an idea that we finance because we seek to form partnerships with the owners. The financing is our own and is basically debt free,” he added.

By the close of the year the company will have invested in about 24,000 business ideas from within the East Africa, some containing similar ideas which are merged in order to make them more viable businesses. Their investment in each of the companies ranges between $10,000 and $20,000 dependent on the nature of the business idea and the implementation strategy.

For the first three months after being set up the company was getting about 18 entries.

One of the ideas that VenCap has invested and is even targeting to go global with is an advertising gadget which controls what is played in a vehicle.

The device allows the controller outside the vehicle to select the music as well as the kind of advertising that commuters listen to.

“The small gadget was developed by two students of the University of Nairobi in their hostels but we have helped it grow into worldwide multibillion dollar venture after getting a worldwide patent for it. While here we charge Sh150 for an advert to run, we plan to take the idea to New York where we hope to get the yellow cabs on board,” said the venture capitalist.