Lean Iterator fund
Lean Iterator (Li) Fund Thesis:
After building over 100 products for startups through our dev studios as well as running workshops for another 80+ entrepreneurs, David and I learnt one thing: that early stage entrepreneurs don’t focus enough on customers and sales. We believe that the best way to have entrepreneurs focus on the right thing is to incentivize them through a path of funding.
The Li fund is a systemic process that lowers transaction costs for making and realizing smaller investments, deploying it efficiently while increasing access and returns.
There is significant unrealized value in early stage African startups due to complete lack of early stage investment. The Li fund makes many systematic up front micro-investments in early stage entrepreneurs and doubles down on those with traction.
Most startup founders in Africa can’t get access to angel or seed investments. i.e. Access to the knowledge, networks, funding and support required is for the already connected privileged. They don't have spare money for airtime or transport.
The Li fund model fixes this by giving small amounts of money with clear targets. Those funds are used to draw on a support network as needed. Initially, will be validated on mobile and cloud opportunities addressing African problems.
An iterator, not your typical accelerator
A continuous process with monthly pitch events allowing entrepreneurs a cadence to pitch for predefined amounts of funding taken as a convertible note. The pitching is in a standardized format and success is measured purely on traction (or proxies for sales).
The support content is available online and consumed at will, with a ‘menu’ of services, mentors and specialists available at various prices at various stages. The startups determine what support they need, how quickly to move through the process, and track all spending. The funding is used by the startups to pay for the program overheads as they need it. Additional government support and entrepreneurship training funding will be used to supplement the early phases.
The Li process:
Using lean startup techniques to iteratively validate and build startup ideas.
$100 Discovery: come up with ideas to validate
$1,000 Ideation: Validate the customer problem and the solution
$10,000 Exploration: Validate the business model and make 1st sale
$100,000 Creation: Launch and grow the business
$500k - $2M Scale: Traditional funding from external angel or VC
The investment
For every $1,000,000 of investment, we create:
500x Discovery (5%), 50x Ideation (5%), 20x Exploration (20%), 6x Creation (60%) funding rounds
10% into program management
Meaning that 60% of the total fund is invested in highly validated business ideas. (1.2% of the total pool)
The goal is for 3 ‘creation’ investments to return 5x, providing a fund return of 50%, significantly increasing entrepreneurship skills in Africa and giving investors access to deal flow.
* The Lean iterator is an idea validation process that was initially developed by myself and David Campey while helping build tech products for entrepreneurs at Playlogix and Afrolabs. It was used by top local accelerators and modified to design a corporate innovation process for a listed financial company. It consists of 6+hrs of video lectures and a playbook of the methodology. The process and content is available under Creative commons on www.leaniterator.com