Nov 26, 2020
Bruce Nsereko-Lule is the Principal at Chandaria Capital, a family-based venture capital fund that supports early-stage startups. Since 2017, they have invested in over 15 companies that operate in a wide range of industries ranging including gaming, manufacturing, logistics, and healthcare.
Bruce previously joined us as an angel on our weekly Live pitch show #TheNest. I sat down for a virtual interview with Bruce Lule to discuss early-stage investment in Africa.
Watch Bruce Lule on The Nest!
Who is Bruce Lule?
I was born and raised in Kenya by Ugandan parents, and I strongly identify as a Ugandan and Kenyan citizen. My parents moved to Kenya during Idi Amin’s rule, but we have always kept close ties with our greater Ugandan family. My years of influence were the early 90’s. Inspired by the growth of companies like Safaricom and KTN, I wanted to understand how businesses grow and what financing instruments they need to scale. So, I tailored my studies towards that. I got into Loughborough University in the UK to study Economics with Politics. Subsequently, I embarked on Investment Banking to learn how finance supports the development of Western economies.
I worked at Credit Suisse in London for about six years managing investment banking businesses, facilitating European and US investors interests in emerging markets. This experience spurred my mission to bring this knowledge home and grow our economy.
At the height of my career at Credit Suisse, I was assisting in managing a multi-million-dollar business. However, at the back of my mind, I knew I had a bigger mission. I resigned and took on an MBA at Strathclyde Business School focused on finance, and later moved back to Kenya to help the Chandaria family set up a venture capital investment vehicle.
The Chandaria family founded the multinational conglomerate, Chandaria Industries. The family desired to give back to the ecosystem by creating a venture capital vehicle to invest in early-stage companies and help them scale across Africa. When I moved back, I helped set up the fund, and I have led it since its establishment in 2017.
My work at Chandaria Capital aligns with my mission to help African businesses grow and scale.
How did the Idea for the Chandaria Capital fund come about?
The Chandaria family is well known for its entrepreneurial spirit. They have made several investments in numerous sectors across the world such as Banking, Insurance, and Real Estate.
In 2014, they heard about Mobius Motors, an automobile startup that was developing a car for Africa, made in Africa. They appreciated Joel Jackson’s vision for home-grown innovation, and decided to invest. This incentivized the family to support similar revolutionary entrepreneurs on the continent, and in 2017 Chandaria Capital was born.
How does Chandaria Capital evaluate a possible portfolio company?
Typically companies seeking venture capital present decks that show their corporate structure and the potential return on investment. We evaluate decks to find businesses that align with our investment thesis. We then do a deeper dive into the business, and its market to discern its fit for us. We consider aspects such as the business’ track record, its product offering to an underserved market, and the company’s potential for scale across Africa.
We are also interested in the overall makeup of the team leading the venture and their ability to execute for scale. We evaluate their financial backers and assess the support the business will need to grow.
Taking all this into account, we conclude on our decision to invest and how we can contribute towards creating a successful venture.
What is your sector focus?
We are a sector-agnostic fund. We focus on pre-series A companies that need capital to take advantage of greater opportunities. Typically we look at companies that offer a unique product that serves a wide market, have a competitive edge, and a scalable business model.
Geographically we focus on Africa. Currently, we have invested in companies operating in many African countries including South Africa, Kenya, Nigeria, Rwanda, Tanzania, Uganda, Côte d’Ivoire, and Cameroon.
How do you collaborate with the companies that you invest in?
As a fund, we believe in ad hoc assistance. We offer capital, expertise, and access to networks. We also provide supplementary help such as: dealing with government legislation and mapping out customer acquisition. Additionally, as part of the Chandaria Industries conglomerate, we afford the entrepreneurs access to our network to help them grow and we have good examples of that.
I can demonstrate how we help, through a quick example with one of our pioneering investees, SokoWatch. They optimize the efficiency of the supply chain for Kiosks by providing them with the stability to order consumer goods and have them delivered within 24 hours. Three years ago, this was a revolutionary business. SokoWatch started in Jamhuri, in Nairobi. They now have a presence across Nairobi, Dar es Salaam, Kampala, and Kigali. We leveraged the relationship manufacturers have with Chandaria industries to get SokoWatch better pricing for some of the goods they sell.
For a kiosk owner, SokoWatch is a no-brainer. If I can order my goods and have them delivered in 24 hours, at the best price, why not? Lower prices for consumers means increased order volumes. In this case, the assistance we provided may seem simple, but it is a considerable assistance to growing Sokowatch’s business model.
Another example is Kobo360, a trucking and logistics company. We provided them access to our network in the logistics industry so they could survey their customers needs. Within six months of their entry into the market, Kobo360 had grown rapidly. I think we played a part in helping them achieve that.
What has made a big difference in your successful investments?
It comes down to a couple of factors. The first is market size. Companies that serve a wide market and take advantage of that opportunity quickly, either through an asset-light or tech-enabled business model tend to do very well.
Secondly, infrastructure that supports the business is crucial. For example, some of our very successful investments include Kobo360 and SokoWatch. These companies have infrastructure within the local ecosystem that’s helped them grow.
KOBO360 is an Uber-like model for trucking. The development of road infrastructure in Africa over the last fifteen years has given a boost to the logistics industry. We have had more people investing in trucks but, managing that fleet presents a challenge. That is why fleet owners sign on to Kobo360 and Kobo, using tech platforms, makes it easy for companies to hire trucks in an organized fashion. Therefore, the infrastructure to scale that business model already exists…to an extent.
Businesses in Africa that leverage existing infrastructure tend to grow fast whereas companies that have to create their infrastructures tend to take longer to scale, if not fail.
Government policy can also affect a ‘startup’s success
Yes. African countries with environments that are challenging for startup business operations are not experiencing the new wave of investor interest we are currently seeing in countries like Kenya, Nigeria, and South Africa.
Countries that make it easier for startups to succeed tend to attract more investment.
How do we engage local investors and high net worth individuals in startup funding?
First, we have to create awareness about this growing investment class. Local investors who have invested and done well can serve as a motivational touchstone. Early-stage investments can seem quite daunting consequently, providing legal and financial advice to potential investors helps to demystify the process.
We have to create forums for conversations around startup investing that persuade investors towards Venture Capital investment and to not place all their money under super safe traditional investments. Roughly speaking, real estate property prices generally increase by about 5% to 6% per annum in the region. Comparatively, an investor’s return on a startup investment is dependent on how fast the startup grows. That difference in return on investment on such traditional investments when compared to early-stage investing, could incentivize a new crop of investors to take it on, however, it is essential that interested investors also learn the risks associated with early-stage investing and how to mitigate them best.
What advice do you have for entrepreneurs seeking funding?
They need to show that their product has a strong market fit, serves a wide market, and is difficult to duplicate. Those are the key aspects an investor wants to see, or at least what I want to!
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