Recently M-Kazi closed their seed round with angel investor Jerome Kisting. This interview is the third installment in a three part series (see part 1 and part 2) and abbreviates from an interview held with Jerome Kisting on Thursday the 22nd of November 2012.
How do you find new companies to invest in?
“I’m very curious, I read a lot. If I find something in a sector that I’m interested in, I will dig a bit in that area. I look at crowdfunding platforms like Kickstarter, I read the VC4Africa newsletter and I’m a member of a couple of LinkedIn Groups.
But if I were looking for an investment in a country where I already have a network, I would always consult them first. So in Kenya I would talk to Lino and Nancy about potential investments that they are looking at. In Namibia it is the same, I go through people on the ground over there. Normally I approach people through my network. I can always go via my own network or someone connected to someone in my network. Linkedin has really made that so much easier.”
What are you looking when you review a team’s pitch?
“I really need to understand how hungry and how focused someone is. How badly does he or she need this to happen? What is it that is driving this person to make it work?
Very often when you start talking about investing obviously you start talking about what the expenses are going to look like, and your biggest chunk of expenses are salaries. If someone really wants to get paid when we are barely making sales, I have a big problem with that. So I need whoever is the founder to really temper their expectations of salary. Because you should not be in this for salary, you need to live but there’s a difference between earning $1,500 per month, or $5,000 per month. Those are the kinds of things that I’m looking at.
I also look at how entrepreneurs spend their money. If you go to an ornate office and they have spent a lot of money on the design, I get worried. Because that means the money is not going to the right things. Those are indicators to me of how people approach their business.”
Beyond the team I want to get a sense of whether this will work. What kind of market research has been done and to what extent is their traction in the market for the product. This is probably the most important thing for me beyond the team.
How do you use VC4Africa as part of your discovery process?
“I think VC4Africa is great. I really like the weekly email that I get with the three trending ventures. I save all of those emails. I find it interesting to see what has happened to them in 6 months to a year. It’s interesting to see what the success rate of these startups is. I really like what I’m seeing from VC4Africa and I can see the organization has grown. And it is very important to put the stories of the entrepreneurs out there.”
What value does VC4Africa offer Angel investors like you?
“The more upfront information, the better. I like the VC4Africa approach of getting access to business plans as an accredited investor without contacting the entrepreneur. I got the m-Kazi business plan via Saskia from VC4Africa and after reading that I then decided to talk to Nancy.
I don’t have staff working for me, so if VC4Africa can do that initial screening and select entrepreneurs that actually have coherent business plans and it looks like the model can work that is really useful. A lot of Angel Investors don’t have their own infrastructure to assess things, so any pre-selection is really helpful.”
What is your advice to entrepreneurs in the community?
“My first advise to all entrepreneurs is: get out on the street! It’s great to have a good idea, but you don’t know if it will work until you get out on the street. There’s a guy called Steve Blank, he talks about market discovery and customer development and testing your hypotheses. I recommend what he prescribes because it is a practical way to understand very early if what you have has traction in the market. If your hypotheses work then you will have no problem raising money, not from me or anybody else.”