Pan-African investment fund 88mph says the new DealWeek model it is trailing in Cape Town this year will suit startups at a later stage in their development more than the traditional three-month accelerator.
Disrupt Africa reported earlier this week on 88mph’s announcement it had partnered with a number of entrepreneur-investors to launch DealWeek, which will see the fund team up with the likes of former Groupon SA duo Daniel Guasco and Wayne Gosling for a one-week programme advising selected startups on their businesses prior to any possible investment offer.
Explaining the move, 88mph said it was motivated by a desire to achieve a few key goals that it had not been meeting under its usual model, such as attracting more developed startup businesses and getting investors who had built successful businesses before more involved in the startups.
“While very early stage startups would probably still apply for a shorter sprint investment programme, many startups who already had staff, paying customers, and operations to manage, had found it tough to commit to a full three-month programme, which also made a good case for a shorter “programme”,” 88mph said.
“We have also seen a demand in Africa for investors that can select and fund startups from US$20,000 almost all the way up to an A-round. So, if we can get this model to work, we can potentially fund a lot more startups.”
88mph said there was a time constraint involved in setting up, implementing, and wrapping up a three-month programme.
“Sometimes we had barely come up for air after one programme, before we began to start the engine up all over again,” the company said.
“The three-month programme also demanded a near continuous staffing and training cycle and had relatively high budget requirements, which became harder to manage in between programmes when there was less to do. Our options came down to either raising a much bigger fund or scaling back on the time and costs it takes to do an investment.”
The fund said the new model would also suit investors, who tend not to have a lot of time.
“Looking back we also found that even when some of them got together to invest in one of our startups after the accelerator, they could end up spending months on term sheets, legal contracts, and agreeing on a direction for the startup,” 88mph said.
“So, we knew that whatever we did with them would have to be short enough to get them onboard, but exhaustive enough that all details of the deal could be completed while everyone was in the same room.”
Though the company admitted it might lose some of benefits of the longer accelerator model, it believed the DealWeek model was worth a try and will therefore be tested this year in Cape Town. Applications for DealWeek are open now until February 8.