Businessman launches US$1 million venture capital fund

Adam Molai

HARARE – Businessman Adam Molai has launched a US$1 million venture capital fund aimed at providing African start-ups with the needed financing.

The businessman hopes that recipients of the funds will create similar multipliers and create a snowboarding effect within the entrepreneurship ecosystem. Launching the JUA Kickstarter, Molai noted that while significant strides have been made in addressing Africa’s hunger for start-up funding, the continent still pales in comparison to the rest of the world.

Africa contributes 1% to venture capital transactions, with North America contributing the most at 53%, Asia at 29% and Europe at 15%. This is despite the recent growth spurt, which has seen the total value of venture capital transactions in Africa rise 67% to US$1.4 billion in 2019 from US$300 million in 2017.

Molai, who is founder of TRT Investments which manages a diversified sector portfolio and operations in Nigeria, South Africa, Zimbabwe, Zambia, Mozambique and Botswana, and whose latest interests have seen a foray into the US and European markets said that it is critical that entrepreneurs arecreative in their approach to funding.

Molai noted that the traditional sources of funding present a fair share of challenges for the African entrepreneur. Some of the challenges being a   lack of knowledge of the funding options available, laborious requirements inclusive of collateral and tenure, convention bias as traditional sources have a bias towards traditional industries and a known way of doing things and lastly red tape as there is generally a long duration to disbursement.

“If funders in America had looked at traditional metrics, there would not be Facebook, or Instagram. Unfortunately, in Africa, the sources of funding still heavily consider those metrics.”

Over the next two months, JUA will be taking applications from African entrepreneurs’ ideas, to start up, to established small businesses that need a capital boost. Applicants will be shortlisted on several criteria including impact on the continent, employment creation and impact of the investment on their business.

Finalists will then participate in a publicly accessible five-day (Olympic) process where the best will progress to each subsequent day. The participants will go through a discussion format pitch to a panel of judges who will score the entrepreneurs based on the day’s theme. At the end of the week, the successful businesses are immediately given a commitment to funding with only due diligence to ensure they have truthful standing between them and disbursement.

Molai noted that to start his tobacco business, he had, together with his partner, to give up 10% equity to a financier, who provided funding for the project. “My partner and I set up Pacific cigarette company by selling 10% of the equity in the business, at concept stage, to raise capital. However, the valuation was rich because we valued it using the net present value of future cash flows method, which – because our projections were strong and attainable and supported by a robust plan – allowed us to fund the company from the sale of the 10% equity.

“But with these kinds of transactions, there has to be performance as you are selling equity on the basis of your credibility. Should the projections underlying the valuation fail to materialise, this will raise potential equity upliftment issues in the future where the investor will now request more equity for their funds invested, based on your actual performance.” They were later to sell an additional 20% to create more critical mass.

Source – finx