Intel Capital â€” the worldâ€™s largest venture capital investor in innovative technology â€” is seeking to acquire stakes in several IT start-ups in Kenya with an eye on long term gains from the highly lucrative business.
The company, the investment arm of Intel Corporation, says it has identified a number of early stage technology enterprises involved in Internet content distribution and e-commerce as well as application development firms that it intends to invest in.
â€œWe are actively and furiously looking high and low for opportunities to invest in, and we will announce the deals as we close them,â€ said Mr Arvind Sodhani, the chief executive of Intel Capital.
His firm is keen on investing in start-ups for periods extending to about 15 years as part of a wider strategy that would enable the venture capitalist firm to exit when the targets have become mature companies.
Though the firm has made multi-billion dollar investments in venture capital in different countries around the World, the planned acquisition in Kenya would be only its third in Africa after last yearâ€™s entry into South Africaâ€™s Altech Multimedia and another buy in Ghana in August 2012.
Last week alone, the venture capitalist announced new investments worth Sh3.4 billion ($40 million) in seven start-up firms from different countries ranked as frontier markets.
Intel Capitalâ€™s Eastern Europe, Middle East and Africa regional managing director Marcin Hejka was in the country last month meeting potential investees indicating that the venture capitalist had identified and was evaluating the candidates in Kenya.
Mr Hekja could, however, not reveal the local firms he had met or the timing of the planned investments, citing confidentiality pacts as negotiations were ongoing.
Intelâ€™s strategy in the market, according to Mr Hekja will be providing patient capital, to guarantee an edge over competing funds that often require early exits, of say five years.
The planned entry of Intel Capital in the local market signifies growing interest from international funds in the highly innovative local startups following the success of the mobile-based applications in Kenya, such as Safaricomâ€™s M-Pesa.
Savannah Fund, a seed capital fund focusing on mobile technology startups in Africa, set up its Nairobi office with an initial Sh850 million package seeking to invest in IT startups.
Its focus will be to provide seed financing in high growth technology (web and mobile) startup investing up to about Sh43 million ($500,000) in the target firms.
The founders of the fund projected that combining capital with mentor networks within the local incubation hubs and synergies from the Silicon Valley via an accelerator programme would enhance the success of the target startups.
There are at least 87 startup hubs in the city and the opening of GrowthHub becomes the latest addition to the growing list.
iHub, Nailab, Startup Garage, mLab, Fablab, 88mph, and iLab Africa have so far opened their doors to young innovators to help market their ideas.
The incubation labs not only provide thousands of young techpreneurs with the infrastructure to enable them launch their start-ups and take their products to market, they also raise the countryâ€™s clout as a regional technology powerhouse.
â€œThough they might be acquiring some organisations over the next year, they are still looking at who fits best. Itâ€™s a bit premature for them to pick now. Ushahidi isnâ€™t among the targets,â€™â€™ says Mr Herman, the founder of Ushahidi.
The Savannah Fund is hoping to capitalise on what it calls a â€˜mobile revolutionâ€™ looming on the African horizon. According to GSMA African Mobile Observatory, mobile services revenue in Africa is forecasted to grow from $12 billion in 2012 to $30 billion in 2016.
Currently, there are more than 19 million people in Kenya who use their mobile devices for banking and the number is steadily growing. Savannah Fund hopes to nurture prototype ideas and turn them into functional business.
The General Partners of Savannah Fund bring a complimentary mix of skill set for deal flow, on the ground due diligence and technical assistance to help startups.
Erik Herman is the founder of Ushahidi, a crisis management crowd sourcing platform and the founder of the iHub in Nairobi, the leading workspace in Subsaharan Africa with over 5,000 members.
Paul Bragiel is a serial tech entrepreneur and founder of i/o ventures, an early stage seed and accelerator programme from San Francisco that has incubated 16 startups with three exits.
A new innovation incubation hub opened its doors to young entrepreneurs last week in Nairobi, further boosting the countryâ€™s profile as a regional centre for startups.
At the Africa Innovation Summit held in Nairobi two months ago, Information and Communication Permanent Secretary Bitange Ndemo stated most techpreneurs miss out on funding because they lack a clear business plan.
Software application developers who have entered into agreement with local venture capitalists have higher chances of attracting international investors than those who have not, says industry experts.
Harry Hare, the executive director of Demo Africa said while there is an increasing number of international venture capitalists eyeing local software innovators, most of them are only keen on putting their money in operations that are already being funded by locals.
The international venture capitalists believe investments that have attracted local interest have higher chances of surviving than those that have not.
The keen interest by venture capitalists is seen to boost the sector which has been stifled by lack of capital for translating the ideas into marketed products.
â€œA number of venture capitalists want to invest in Africa but say they can only do so in activities that have attracted local funding and have some visibility,â€ said Mr Hare.
The demands by the international venture capitalist comes at a time when it is emerging that despite producing innovative software, Kenya and Africa has failed to turn these ideas into viable enterprises.