Kenyan telco Safaricom launched its Spark Venture Fund aimed at investing in late seed and early growth start-ups.

Spark Venture Fund will have $1 million to invest in companies in Kenya over the next two years.

John Kieti director at m:Lab East Africa, a mobile start-up incubation centre, welcomes the fund into the Nairobi tech ecosystem and says it is an added advantage for the market.

The Spark fund aims to invest at minimum $75,000 to maximum of $250,000 for great ideas ranging from mobile payments, media content, SME cloud solutions and Data/Messaging. Companies need to have been operational and have some users.

“Entry of Safaricom into the venture funding space is the turning of a new page in Nairobi’s start-up ecosystem. The space has been in dire need for more venture capital to match local access to capital gaps,” Kieti told ITWeb Africa.

“Safaricom’s fund is small and is a pale comparison with other corporate VC funds such as Google Ventures, Qualcomm Ventures, Intel Capital, etc.

“It is however a strong message of confidence in the fledgling start-up ecosystem by a local corporate. It ushers in an era of local corporate VCs playing in the start-up scene as strategic positioning by local corporates to remain innovative, growth oriented and future proof,” he added.

Kieti however cautioned on some of the challenges that are facing the funding system in the region.

“At the early growth stage, many start-ups have an idea that they should raise more funding to scale faster. But many of them are not prepared for the intensity of fund raising itself and the rigour of due diligence by investors,” he said.

Kieti explains that some of the investment deals fall through because either the start-ups did not commit themselves fully to the fundraising process or had many red flags during the fundraising process.

“Many start-ups simply don't commit enough resources to the venture fund raising process,” Kieti said.

However, he called on many more investors to join the funding market to offer variety and alternatives.

“Although there are a number of funds setting up camp in East Africa, they are still few and very countable. Considering the funds’ unique mandates, funding philosophies, and ticket sizes, it’s not unexpected for an investable start-up to be a mismatch for all the funds around. So to start with, the ecosystem needs many more diverse funds - assuming there’s a growing number of good quality investment opportunities for them,” he stated.