The fund, named the Novastar Venture, is estimated to benefit two million people over the next decade and was established through combined efforts of the United Kingdom’s Department of International Development and JP Morgan Chase and Co.
“The Novastar Venture is a new venture fund focused on investing in businesses that serve the niche market in East Africa including low income households, education, information, health care and the like,” Steve Beck, the managing director of the new fund told CNBC Africa.
“[Since] we are investing in start-up businesses we are looking for entrepreneurs with the character, capacity and ambition to build businesses to serve the low income markets profitably.”
Novastar Venture is an early stage venture capital fund aimed at Kenya and Ethiopia with the possibility to follow its investees into Uganda, Tanzania and Rwanda.
Novastar uses the multiple round investment approach, also seen in venture capital funds for start-up and early stage companies. In the first round, a smaller amount is invested in a start-up, and is followed by larger investments in subsequent rounds if the company meets certain milestones.
Beck added that investing in start-ups was identified as a missing yet critical element in Africa’s development.
The East African Community (EAC) consisting of Burundi, Kenya, Rwanda, Tanzania and Uganda have in the past few years put in place necessary systems meant to promote entrepreneurship.
According to a report, Doing Business in the East African Community 2013, EAC have seen an improvement as far as regulatory frameworks are concerned.
The report noted that the EAC saw its five governments implementing a total of nine regulatory reforms in 2012 to improve the business environment for local businesses and encourage entrepreneurship in the region.
BY TRUST MATSILELE