ViKtoria Ventures has been working in partnership with HEVA Capital since March 2014 through provision of advisory services. The first engagement was a research into the creative sector in East Africa to establish what financial interventions would be feasible and have the greatest impact on creative entrepreneurs. This research pointed to an accelerator with entrepreneurs getting funding to actualize their businesses as having the highest impact in the Kenyan ecosystem. Following on this ViKtoria was engaged to develop a strategy for the Accelerator and funding mechanism behind it, it is this strategy report that has resulted in disbursement of funds to six creative entrepreneurs.
Heva looks to invest in the growth strategies
Heva looks to invest in the growth strategies of creative startups to get them investor ready. The ViKtoria team is pleased to announce that together with the HEVA team we have completed our first investment cycle. Approximately $56,000 was invested in this cycle which targeted creative industry businesses operating in Kenya, within the Fashion, Apparel, Crafts, Handmade Items, Music and Music Performance sub-sectors.
The essence of the funding was to assist businesses to increase their production capacities, launch new product lines, invest in new technology and/or expand their distribution network. ViKtoria Ventures in conjunction with HEVA Capital were able to disburse the funds to six high potential creative ventures from the 95 eligible applicants countrywide.
The Process
We conducted a five-phase short-listing process to select HEVA’s first cohort of high potential creative businesses. The first phase consisted of the creative panel whose primary role was making recommendations based on the creativity of the entrepreneur, the quality of the product and the value proposition of the venture. The second phase involved the analysis of the business success indicators, such as the existing business models of the ventures and their financial viability. In the third phase, the short-listed applicants pitched their businesses to the HEVA and Viktoria teams. Subsequently, the fourth phase was the due diligence exercise where we visited the creative entrepreneur’s premises and evaluated their management accounts. Thereafter, the preliminary investment offers were made. The fifth and final phase proved to be the most intense as we developed financial models for each of the short-listed applicants in order to further asses their financial viability as well as their ability to repay the funds disbursed to them. The financial models enabled us to establish the most appropriate loan structure for the businesses and the amount that would need to be disbursed.
The process was quite insightful; one of the key insights was that there is a great need for creative entrepreneurs to appreciate business tools to run their businesses. Some of the tools that would be of help would be accounting and inventory management systems, applications to record purchase and sale transactions etc. Secondly the lack of interest for one of the products on offer for entrepreneurs; revenue based financing was startling for us. The product had been proposed as an alternative to straight debt but all creative entrepreneurs opted for the debt. One of our assumptions is that the terms of the revenue based financing may not have been as attractive to the entrepreneurs. Our interactions with the entrepreneurs also point to a challenge in appreciating the risk of debt as compared to a risk taking revenue based product.
As we plan for the second round of disbursements in 2016 we look forward to applying our learning points. Of course our work with the current cycle has just started and one of our key success metrics will be how much of the disbursed funds will be repaid.
