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Kenyan start-up firm sparks first investment by telecoms venture fund

Out-Law News | 11 Nov 2015 | 12:48 pm | 2 min. read

An on-demand package delivery start-up in Kenya has become the first beneficiary of a venture fund established by Kenyan mobile telecoms operator, Safaricom, to support domestic information communication technology (ICT) start-ups.

Safaricom said Nairobi-based Sendy will benefit from the $1 million ‘Spark’ venture fund, established in November 2014, which will invest an unspecified sum in Sendy’s ICT infrastructure and technology platform.

Safaricom said Sendy offers “a marketplace for last-mile package delivery and logistics services, allowing customers to send packages and documents in and around Nairobi using a mobile application that connects them to motorcycle riders and drivers of vans and pick-up trucks”.

According to Safaricom the venture fund will provide each successful start-up such as Sendy with between six million Kenyan shillings (Ksh) and Ksh 22m ($59,000 and $215,000).

The fund has received more than 400 funding applications to date, “with an ongoing evaluation process of potential start-ups” that will benefit from the venture fund, Safaricom said. “Rather than offering grants... Spark invests in start-ups by purchasing minority equity stake or providing convertible debt, allowing young businesses to access the finances needed to grow their businesses.”

The venture fund is managed by the TBL Mirror Fund, a private equity fund for East African and Nigerian small and medium enterprises. TBL managing partner Eline Blaauboer said: “For us to invest in a start-up, we need to believe that both the product or service and management have the potential to scale and become number one or two player in their chosen field. Sendy has a lot of promise in this area and has started to ramp up sales and operations, so we believe it is the ideal candidate for our investment.”

In addition to Safaricom’s investment, Sendy “will also have access to strategic partnerships, network elements, and a mix of marketing opportunities that will help it expand”, Safaricom said.

Sendy chief executive officer Meshack Alloys said: “When we launched Sendy in September 2014 we had a vision of making package delivery as simple as sending a text message. We wanted to use technology do this, so we created an app that is easy to use, offers transparent pricing and supports cashless transactions.”

Alloys said: “Having Safaricom believe in us enough to come on board as an investor is a big boost to our business. We intend to use the funds received to invest in our infrastructure, improve our platform, roll out new features and services and grow our team so that we can provide an even better customer experience.”

Alloys said Sendy has been using Safaricom’s M-Pesa mobile money service as its “main payment collection method” and the firm is launching “a new seamless payment checkout process” that will work directly through Safaricom’s newly released ‘M-Pesa API’.

According to Sendy, other investors in the start-up include angel investing group Kernel, which focuses on very early stage technology investments in Africa and the Savannah Fund, a seed capital fund specialising in web and mobile technology start-up in sub-Saharan Africa.

Safaricom was the first operator in Kenya to launch mobile data services in 2003 on the 2G platform and was the first to launch its 3G platform in 2008. The company said it has more than 3,200 base stations in Kenya, “nearly half of which are 3G-enabled”. Last December, Safaricom launched its Long Term Evolution (LTE) advanced 4G network, initially covering Nairobi and Mombasa, “before scaling up coverage in other major towns”.

Earlier this year, the Communications Authority of Kenya (CA) signed an agreement with the World Bank’s International Finance Corporation (IFC) to promote competition and investment in Kenya’s telecoms sector and strengthen the regulatory environment.

The CA said the agreement was part of the IFC’s ‘Kenya Regulatory Reform Programme’, which provides advisory services to help boost the development of the private sector in the country.

According to the IFC, “Kenya’s M-Pesa is one of the most well-known mobile money operators in the world and is used by over 70% of Kenyan adults”.