Jake Kendall is the Co-Founder and Partner of DFS Labs, a venture firm that invests in digital commerce startups in Africa.
In the debut edition of The Investor’s Corner, Jake shares how he transitioned from being a physicist to a venture capitalist, his journey co-running DFS Labs, and his thoughts about possible trends in the African tech industry.
How Jake Kendall became a venture capitalist
Was the dream always to become a venture capitalist?
Not at all. I initially wanted to become a scientist.
Oh. What changed then?
I got interested in something else.
What do you mean?
So I actually started down the road of becoming a scientist by studying physics at the Massachusetts Institute of Technology (MIT). After graduation, I volunteered for a program that made me visit Northern Zambia. There, I supported fish farm projects in a group of remote villages. Doing this got me thinking about economics, particularly why some countries are rich, and others aren’t.
In a bid to satisfy my curiosity, I did a PhD in economics at the University of California, Santa Cruz. Afterwards, I got to lead CGAP (Group to Assist the Poor) Financial Access Survey and other research projects at the World Bank.
Amazing! How was your experience at the World Bank?
It was exciting, involving lots of rigorous research and implementation. I joined about the time that M-PESA was just getting started. At the time, it was the only successful mobile money deployment on the planet but I got to work with them and some of the ones that followed. It was also there I first got to collaborate with the Gates Foundation on some projects.
How DFS Labs started
Yes. After a few collaborative projects, I joined the Gates Foundation full-time as a Senior Program Officer of the Financial Services for the Poor (FSP) team before becoming the Deputy Director.
During my tenure as the Deputy Director, I invested in research and in new technologies to improve financial inclusion, leading to $200 million in grants and contracts. Through that work is where the idea for the DFS Lab was formed.
Tell me more about that.
While at the Gates Foundation, I got a lightbulb moment to bring new fintech tools that would serve low-income households to developing markets.
To make this a reality, I joined forces with Stephen Deng, who I had met at the Gates Foundation, to build DFS Labs. We initially served as an accelerator for high-potential entrepreneurs working to introduce innovative fintech solutions to the developing world. The Gates Foundation gave us the grant to kickstart operations.
So DFS Labs didn’t start out investing in only digital commerce startups?
What made you change direction?
The market wasn’t ready for the technologies we were trying to push. We also saw great potential in digital commerce in Africa, making us readjust our mission. Right now, we only invest in founders building the future of digital commerce in Africa.
Why the focus on Africa?
On a personal level, my experience in Northern Zambia and working at the World Bank made me passionate about solving Africa’s economic challenges. I mean, that is the primary reason for studying economics as my second degree.
From a business perspective, my team and I see a prosperous future ahead for Africa. We see huge opportunities where others perceive risk.
What validates this optimism, though?
First, we are very research-driven. We believe the data shows significant opportunities in digital commerce and shows we’re on the right track.
More than that, we’ve seen a growing number of investors show interest in digital commerce. Indeed, there is still a crazy hype around FinTech, but investors are now noticing digital commerce and investing in the space. This is strong validation.
Speaking about FinTech, what are your thoughts about the industry?
I believe FinTech might have been slightly overhyped globally. The falling valuation of fintech companies like Stripe and Coinbase in the current market downturn illustrates my point.
On the market downturn
How long do you think the market downturn will last?
I don’t have an exact answer as there are certain uncontrollable factors contributing to the current economic crisis. Past downturns tend to last from 9 months on the short side to 2+ years on the long end (e.g. 2001 crash). But let’s say about 18 months, with a high level of uncertainty.
What’s your piece of advice for early-stage founders trying to survive the next 18 months?
Be cash-efficient and focus on building quality products and services that tackle the biggest market opportunities. The era of mindless cash burn and ignoring profitability is over.
What are some exciting trends you see happening soon in the tech industry?
I foresee a surge in the number of investors in the digital commerce space. This is already happening as we’ve had certain interesting African and global funds reach out to us to help understand the market.
I also see top talent from around the world coming to work in Africa. There are still lots of people who leave but we also see a lot of them coming back to start or work in African companies which is exciting.
The future is certainly bright.
About DFS Labs' investor community
I see DFS Labs has an investor community, Sufficient Capital.
Yes, we do.
Can you tell me more about that?
Sufficient Capital is a community of angel investors exploring early-stage African startups. We thought of building it because we saw so many angels from around the world wanting to co-invest with us.
We also realized many of them brought their own insights and skills that could augment our in-house expertise. So we thought why not create a close-knitted community of such people?
What are some of the benefits you’ve enjoyed from building Sufficient Capital?
We’ve been able to add more value to our portfolio companies. It's been great also to get to know the members and watch a real community start to form. For example, we all recently celebrated one of the members graduating from her MBA program and taking a very exciting new job. I am not sure there is any particular business value in that but it adds joy and fun to our work.
Some of our deals also come from the community, as investors constantly introduce us to outstanding digital commerce founders in their network, so it is quite collaborative.
What would you do differently if you were to restart DFS Labs?
I’d have taken bigger steps early on and been less afraid.
The Investors’ Corner is our latest web series spotlighting the stories of African-focused investors and how they make investments on the continent.
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