How To Smartly Invest in Kenya Startup Ecosystem As An Angel Investor

Investing as an angel is rock hard but when you hit the jackpot, it brings the best fortune.

Angel investment is the stage where founders change ideas to make it a product. It's a hiatus process but I will provide you with few tactics you can use to make a smart decision in choosing your target or joining the angel investment market in Kenya.

JOIN A NETWORK

This is the first step into joining the Kenya startup ecosystem. Networks are so connected to the industry and when you register as an angel investor, you are guaranteed to have discussions with other angel investors like you, attend meetings, know the process of angel investment and come across great startup founders.

The biggest and the most successful angel investment network in Africa is The African Business Angel Network (ABAN) , a Pan-African non-profit association that was founded in early 2015 in South Africa to support the development of early-stage investor networks across the continent and to grow the cohort of early-stage investors excited about the opportunities in Africa.

The network in its website explains,

"seeks to promote a culture of angel investing across Africa. With networks of Angel Investors emerging across the continent, ABAN serves to connect them and works to collect knowledge and develop best practices in order to share this with African investors. At its core, ABAN exists to create a contact point for existing networks, to support stakeholders involved in building the ecosystem, and to promote the creation of new Angel Investor networks. In turn, ABAN ultimately seeks to build the SME economy and improve the climate for entrepreneurs".

ABAN was started as a consortium of independent investor networks including Lagos Angels Network (LAN), Cameroon Angel Network (CAN), Ghana Angel Investor Network (GAIN), Venture Capital for Africa (VC4Africa), and Silicon Cape; supported by the European Business Angel Network (EBAN), the LIONS Africa Partnership and DEMO Africa.

With a common goal of connecting these African networks, supporting new investors and networks to maximize their impact, and connecting African investors to their global counterparts, the need to form a Pan-African association of Angel Investor networks and other early-stage investors became clear, and ABAN was born.

The network promotes a culture of angel investing in Africa at large, support existing network, help develop new networks, and training of individual Angels.

Back at home, you can also join firms such as Viktoria Ventures, one of the first angel investment network in Kenya. Founded in 2015, it's a start-up ecosystem development venture focused on attracting local and international angel investors to the best start-ups emerging in East Africa’s innovation space.

Angel investment network (Kenya investment network)

This the world largest online angel investment community in the world. It has 30 branches extending to 80 different countries and has 1,116,529 registered members with 199,602 investors and 916,926 entrepreneurs. They have already raised US$300 million for some of the coolest startups in the UK and across the world. Go to their website (angelinvestmentnetwork.co.ke), create an account as an investor end you will see potential startups in Kenya and across the world to invest in.

Vc4 Africa summarises the nature of the angel investment network as this,

"Each initiative works with a different business model and applies a different protocol for managing their operations. Some networks are membership driven while others rely more on brokerage fees. Others seek sustainability though syndication".

So the best way as an angel investor is to study these business models and join the one you think is good for you.

STUDY MARKETS AND TRENDS

While many prefer to put their money by backing an existing portfolio or wait for experienced investors with a track record to make the first move, it’s not a smart decision. In fact, your gut feeling is much better than following someone else decision. Often these experienced investors don’t have a model but to invest as many as possible to get that one unicorn!

So the best way is to focus on consumer trends, emerging technologies and those products disrupting an industry.

How do you know this? Once a week, make a habit of reading technology blogs across the world, Africa and also in Kenya. The good part is there are different outlets to read about startups and tech. I can’t get all but these are some that might give you a picture of what is happening in the ecosystem, what startup is being funded and what technologies are being used and why.

1. IAfrikan
2. Disrupt Africa
3. Weetracker
4. Cio
5. Techmoran
6. How we made it in Africa
7. Nairobi Garage newsletter
8. iHub blog

Another way to stay in the loop is to look for insights and data reports released by ecosystem players. Though things like funding might confuse you as I have highlighted in my previous article https://link.medium.com/u9LHJlfhIU ,you will still get important insights, compare sectors and be aware of the latest tech trends.

TIMING IS CRUCIAL

Bill Groos, an American investor in his famous TedTalk video talked about ' timing' being the single biggest reason for startup success. In your case, timing the market is the one thing you need to focus if you want to hit the jackpot with the startup you just invested in.

Timing the market means that you essentially work hard to time the market as it relates to the potentially explosive growth of your target market in a startup. There are many factors to consider when you launch a new product in the market. These are the broader ecosystem that must be emerging or in place for your business opportunity to have great potential. You should see broader trends that will positively or negatively impact your ability to drive a rapidly growing business.

One of the tools that many successful business people and investors have found incredibly valuable in this context is change factors analysis, which is sometimes called PESTEL analysis. PESTEL stands for political, economic, social, legal and environmental factors that can impact your market. Another tool, popularized by Harvard Business School professor Michael Porter, is Industry Structure Analysis, also known as Porter Five Forces Analysis. Although you can never predict with pinpoint accuracy when a market will ignite, you can have a pretty good idea within a couple of years.

You should keep in your mind that if a startup or a product is early to the market, it's okay as long as it's not massively early but if the startup you are investing is late in the market, it's likely to lose. Unless it can adapt fast and has a differentiator.