This story was featured in Ventures Africa magazine’s February/March Edition….

A global network of experienced entrepreneurs prepare to invest the time and money required to give Africa’s most promising early stage tech companies the head start they need.

A small group of Cape Town-based mobile tech start-ups are next in line to take part in the 88mph programme, which has already given some of Nairobi’s mobile web businesses a major boost.

Founded by Kresten Buch, 88mph is an early stage start-up fund combined with a three-month accelerator programme that assists start-ups by giving them capital in the form of an investment, access to business networks, and the know how to grow their businesses. The programme’s African strategy is to fund strong teams with web-mobile ideas that can scale across English speaking Africa.

To participate in the programme, applicants must complete an application form consisting of 15 questions. Buch says some of the criteria considered before accepting a new applicant include dedication, motivation and whether or not the entrepreneur is willing to take the risk of building his or her business. “Will he quit his job and come work for 50 percent of the salary he earns in a corporate job?” Buch asks.

The name ‘88mph’ is a reference from the movie Back to the Future.

In the film, 88 mph was the all important speed required to travel through time. The team behind 88mph first came to Africa in 2010 when they set up a 48-hour investment boot camp that resulted in an investment in M-Farm – an SMS service that helped small farmers get access to the market prices of their crops. Since then, 88mph has added 15 mobile-web based start-ups to its portfolio and invested up to $500,000 to date. In Nairobi, eight companies benefitted from the programme. These included a mobile music start-up called Mdundo and an airtime credit start-up, Nanovas. All the start-ups from the Nairobi round are currently generating revenue.

88mph prefers to back teams, not individuals, and it is a prerequisite that applicants are able to write code, design or lead a product or team. Buch says that building a company as a sole founder is very difficult, so teams of two to four founders are sought. Altogether, between eight and 15 teams will be chosen to participate in the three month programme.

88mph invests in start-ups still in the early stages, as well as those in the growth-funding stage.

By the time a business is at the growth-funding stage, the business model has been proven and the business is ready to scale. This includes idea stage, prototype, user traction and revenue generation.

88mph focuses on web-mobile ideas because, according to Buch, these are normally scalable and entail low costs to get tested. “It fits our model well with a short three month programme and relatively small investment. Also, if you are to invest early stage, you need to know the space. We come from web and mobile [backgrounds] so we stick to what we know,” he says.

While most investors tend to steer clear of start-ups because of the perceived high risk of failure, 88mph specifically targets these companies.

“The risk is very high, but the return on early-stage start-ups can also be very high,” says Buch, adding that to mitigate some of the risk, 88mph invests a smaller amount across several start-ups. “We are tech entrepreneurs, so we feel it is the early-stage game where we can make the biggest different and create the biggest value.”

To determine how much is invested into each company, Buch’s team looks at a minimum amount that can give the start-up a “runway” of six to eight months, based on their budget, which is discussed before 88mph invests. A maximum of $100,000 is invested per start-up. 88mph is a privately backed fund, which comprises a minimum of 30 percent of the founders’ money. For the remaining 70 percent, the aim is to raise as much local money as possible. “In Nairobi, the fund is 70 percent local investors that have put money into the 88mph Nairobi seed fund. In Cape Town we are still talking to local investors to get the percentage of local investors as high as we can. Local investors generate more value,” says Buch.

The investors take an equity stake in the start-up businesses in return for their funding. At the end of the three-month programme, 88mph hosts a demo day where the start-ups are given access to a group of investors to showcase what they’ve achieved so far and hopefully to secure follow-on funding for expansion of their businesses. As they grow, the businesses continue to receive support from their investors but not on the same scale as during the first three months. “The 88mph business model is to get start-ups to succeed. If [they don’t], then we don’t make any money. So we of course try to help after the start-ups are done with demo day,” Buch says.

According to Buch, the programme focuses on each company’s individual needs and also helps connect the start-ups to people who can be useful for their growth.

“It’s very action-oriented, trial and error and pushing the team into the market,” he says. In Cape Town, the 88mph team has managed to secure a partnership with Google. This enables the right space and Internet resources to build tech companies. It also provides access to Google’s experienced web professionals, who can mentor the start-ups.

88mph was first launched in Nairobi in 2012. “Kenya is the leading tech hub in East Africa and the country with the highest penetration of mobile money, so it seemed like a good place to start,” says Buch. Only one programme is run at a time – Nairobi ended on 13 December 2012. Cape Town will start in February 2013. Buch is already scouting where to go next. “I am looking at a city in West Africa, either Accra or Lagos,” he says.

Looking ahead, Buch says he wants to expand the programme and make the value proposition to start-ups even stronger. He says VCs have also shown interest for a feeder fund to feed the individual programmes in the different cities. “They are interested in what we do as we help build deal flow for them and they like to get insight on what works and doesn’t work in this space in Africa.”

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