Kenya's cleantech program too optimistic - but still worth watching

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By: SGN Staff

By Steve Minnihan

Developing nations are increasingly viewed as hubs for innovation and hotbeds for promising start-up activity. The World Bank is attempting to accelerate this by opening the Kenya Climate Innovation Center (CIC), a fund intended to invest $15 million over a five-year period to finance and foster 70 ventures developing climate-focused technologies for the Kenyan market.

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The ventures will focus on technologies for off-grid power and energy supply, water treatment and supply, micro-hydro generation, flood and drought adaptation, agriculture and biofuels. According to the CIC business plan, $9 million will go to finance the ventures, while another $2 million will go to programs intended to foster the success and growth of the ventures.

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The CIC has aggressive goals for its portfolio of ventures, seeking a 50% survival rate for all companies that achieve the proof-of-concept (POC) phase and a 75% survivability rate for companies that reach seed-funding stage within three years – a tall order for a fund that only has $129,000 to allocate to each venture. To add to these seemingly impossible goals, the CIC expects that after 10 years, 92% of the fund's investment costs will be covered by revenue from the loan principle and interest from the ventures in the fund.

 

These metrics seem impossible to achieve, given that the global cleantech venture landscape sees well-financed companies fail on a weekly basis. Furthermore, cleantech ventures routinely require between $100 million and $750 million in financing before they attain a level of sustainability, or eventually fail (look to A123 Systems, Solyndra and Amyris for examples).