African Accelerators Change Tack As ‘Savannah Valley’ Emerges From The Wilderness

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Kenyan accelerators, following mixed results from their rookie season, have tweaked their strategies for mentoring and investing in local entrepreneurs, in a bid to produce more successful startups. Accelerators 88mph and Savannah Fund are experiencing the growing pains felt by nascent, global startup ecosystems, attempting to transplant the popular investment model pioneered by Y-Combinator.

Their experiences contain some important lessons for achieving success in a fledgling ecosystem.

In late August, 88mph invested $500,000 in its third batch of startups, taking the firm’s total financial commitment to $2million across 32 startups — in which it owns stakes varying between 10 and 25 percent. It’s been a mixed start for the program, according to manager Nikolai Barnwell. He said 7 of the 24 graduates have either raised money or haven’t needed to because they’re already profitable. However, after doing the sums on the inaugural class in 2012, he found that 50% of their participants had “failed” — that is the founders are no longer working full-time on the startup.

“There are so many cool ideas to do down here and sometimes in the past we’ve fallen in love with ideas and thought to ourselves that we could fix the founding team,” Barnwell said. “But you can never fix founders.”

They’ve applied more discipline in selecting their third round of startups, Including social travel network Touristlink; food delivery website Yum; Kenya’s Amazon Web Services Kili; mobile agri-payments startup Iprocure; and mobile ticketing platform Booknow.

“This time we’ve focused very hard on investing in really cool founders and we’ve let a lot of cool ideas go.”

“Here, technical skill isn’t topically what sets winners and losers aside because a lot of the stuff here isn’t that technically difficult. It’s more about building services and understanding how to take products to markets.”

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It was a similar learning curve for Savannah Fund, where three of the four startups made it to graduation. Managing partner Mbwana Alliy told startups blog Wamda some of their founders lacked sales and marketing skills and that two startups weren’t incorporated when they joined the program — which led to problems when it came to handing over the $25,000 funding in exchange for 15% equity. Alliy previously wrote the firm is focused on high-growth, risky ventures, but appears to have played it a bit safer on the second go-around. For the sophomore class it has specifically focused on payments startups (a darling of investors everywhere). Three of the four startups — Cardplanet, Inforex, and Zished — facilitate transactions, while the other Zaiti, is a mobile e-commerce platform developer. It’s a marked change from the spread of e-commerce (Ahonya), games (Kola) and travel bookings (Safaridesk) in the first round.

Shifting gears like this is a natural step-change as accelerator doyens apply the model, championed by Y-Combinator, to the vagaries of an immature startup ecosystem.

In Australia, between 2010 and 2011 entrepreneurs were spoiled for choice as a number of accelerators popped up in a quick period of time, including Startmate, PushStart, and AngelCube. First-mover Startmate facilitated some key exits and investments and is now the first-choice for local venture capital firms and entrepreneurs alike. Founder Niki Scevak leveraged this success to launch Blackbird Ventures, to support the Startmate companies and other Aussie startups. Conversely, PushStart recently shut down its accelerator program, after the founders decided there were better ways to service the Australian startup community. The other accelerators have adopted new strategies to differentiate themselves in the increasingly crowded marketplace.

The one-accelerator-to-rule them all evolution has played out globally.

According to data from Seed-DB, which compares the performance of startup accelerators around the world, one player in each country usually establishes a dominant leadership position. For example, graduating startups from Y-Combinator (US), Seedcamp (UK), Startupbootcamp Amsterdam (NL), and Startmate (AU) have raised many multiples of funding compared to their counterparts from other local accelerators (This could change in the UK as TechStars recently established its first international beachhead by merging with local organisation Springboard).

For Savannah Fund, in the process of raising $10 million, and 88mph, backed by South African early stage venture fund 4Di Capital, it looks like the real work is about to begin.