Three Lessons From Nairobi and Kigali

Most small businesses in Kenya and Rwanda are capital-starved -- even ones that are turning a profit. But in the vast majority of cases, there is much pre-work to be done within the business to lay the foundation upon which an infusion of capital can grow the business. Without this pre-work, capital can exacerbate unresolved issues and ultimately hurt the business.

Equity is a powerful, patient instrument that will help close the gap between SMEs and big business in East Africa. But it comes with a set of responsibilities and expectations that are poorly understood, for the most part, by business owners. Yes, equity entails some loss of control -- but also a host of connections and resources that can propel the business in new ways. Owners need a place to think hard about not just how much, but also what kind, of financing will serve their business best. There is a lot more to capital than money.

Management teams need their capital partners to help implement change, not tell them what to do. Before this trip, I did not really grasp the difference. Both investor and business owner need to be prepared to roll up their sleeves and get to work both "on" the business and "in" the business.