This article by Russel Southwood originally appeared at SmartMonkeyTV, a VC4Africa publishing partner, and is published with permission.
There are now many ICT incubators and accelerator units across the continent and the beginning of what seems like a burgeoning start-up culture. An Angel network has been set up and there are both local and international funds for those whose business has some trading record. There is also now a network of impact investors who are interested in social as well as financial returns. Below I look at six ICT incubator and start-up funds I’ve interviewed and try to draw out some of things that are happening and the challenges ahead.
88 Mph, Nairobi and Cape Town: The first of these organisations is the accelerator 88Mph that has offices in both Nairobi and Cape Town. It seeks to find start-ups that need initial modest funding to get to the investment starting line. They select their start-ups and work with them to help shape the business and make introductions to potential funders. In the video clip interview below, Nikolai Barnwell, 88 Mph describes the work of the organisation:
Two start-ups that have come out of the 88 Mph process give some idea of one strand of their interest. A year ago South African Simbarashe Mabashe, Wabona.com was a man with good idea and only a few thousand users. Now he has raised his initial finance and attracted nearly half a million users. See video clip interview with him below:
Martin Neilson co-founded the Kenyan mobile music platform Mdundo and is one of a handful of local African music platforms that is beginning to get traction. See video clip interview with him below:
Jokko Labs, Senegal: The growth of ICT incubators is not restricted just to Anglophone Africa. In Senegal, long-time ICT player Karim Sy set up Jokko Labs and is now franchising the operation into different countries. This expansion includes France and a promised move into Anglophone Africa. He’s also not just interested in ICT projects but finding some way of harnessing the energy of the nascent Maker movement in Africa. See video clip interview below:
“We”nnovation Hub, Lagos: There are two ICT incubators (Wennovation Hub and Co-Creation Hub) in Lagos seeking to harness the intense interest in start-ups among young Nigerians. Most parents would prefer their children became lawyers or worked in a large company but these brave pioneering souls are seeking to create new businesses in one of Africa’s largest and toughest markets. Co-Creation Hub has a focus like many incubators on social start-ups that will address the many problems in the country using technology in one way or another. However, a more prominent start-up like Paga developed and found funding outside of the incubation process. To see a video clip interview with Wole Odetayo who describes a Wi-Fi content player being developed by the hub and how his mother uses What’s App:
Kinu, Dar es Salaam: Kinu is another incubator space that makes much of the idea of co-creation, the bringing together of different talents and ideas to give birth to new start-ups. For a number of historical and cultural reasons, Tanzania has a less developed start-up culture than its neighbor (and favorite grudge match partner) Kenya. Nevertheless things are changing and new businesses are being born but again the most significant examples came from outside of the incubator hub. However, to be fair, it’s early days so I’m watching with interest. For an interview with founder John Paul Barretto, see below:
kLab, Kigali: Most ICT developments in Rwanda come from the top down and tackle the big gaps like infrastructure so it put a smile on my face to see an ICT incubator that is well used by young Rwandans. It focuses on both commercial and social start-ups and seeks to give advice and a helping hand to those that want it.
A typical social start up is Esther Kunda’s OSCA Connect, an advice and market app for farmers. This is now such a deep seam for projects and companies that it’s surprising that more progress is not being made. However, it’s early days for this one…See video clip interview with Esther Kunda below:
A more developed start-up in the same genre is Susan Oguya’s MFarm which is working with a significant number of farmers, both giving advice and setting up deals for produce from smallholders. MFarm is a tenant of Nairobi’s widely known iHub. See video clip interview with Susan Oguya below:
iHub founder Erik Hersman has long maintained that access to finance, particularly at the lower end of the scale, is a key barrier for successful start-ups to negotiate so it’s good to see the Savannah Fund which he co-founded announce its accelerator class to work out of the m:lab offices. The four startups come from four countries and were selected after a month long competitive process, including 80 applications.
“Whilst we received less applications this batch than the last (180), the quality was higher. Twenty-two per cent of the applicants reported to have generated revenue compared to 15 per cent from the last application pool. Seventy-two per cent of startups had a prototype versus 62 per cent in the previous class,” said a Savannah Fund statement.
The startups include Cardplanet Solutions (Kenya), a payment solution where mobile money meets cards initially targeting students and schools, Inforex (Uganda), a network of foreign exchange providers within Africa allowing them to check and trade currencies amongst each other, Zatiti (Kenya), a website/mobile web builder and e-commerce platform for small merchants in East Africa, and Zished (Ghana & Nigeria), a gifting and loyalty e-commerce platform targeting both local, diaspora Africans and corporate entities starting in Ghana.
JoziHub, Johannesburg: Last but not least, JoziHub came out of the energy and determination of Gustav Praekelt. Situated in a rather funky urban revelopment project at 44 Stanley Avenue, Milpark, it has a mixture of social and commercial projects. One of those, Cyclogy, is developing electric bicycles for use in the city and will be the subject of a video clip interview to be uploaded next month. To hear JoziHub’s Community Manager talk, click below:
So what does all this activity tell us? On the upside, start-ups have become an accepted part of national development in many African countries. Governments like the emblematic quality that young people striving to succeed has in worlds that are often dominated by politicians who still have their e-mails printed for them. Indeed in Kenya the Government has started to mobilise loans for this activity and this has sparked a small campaign for similar funding in Nigeria.
But at the sharp end of the pencil things remain challenging. Techies are not necessarily good entrepreneurs. I recently read an article that argued that only coders make good entrepreneurs because in short, they understood what was possible. However, whether the entrepreneurs are techies or not, they certainly need to gather a more significant group of skills around them.
For example, there are now many online film and video platforms but there are few entrepreneurs behind them who have understood how the rights market operates and why that might be important to them.
It is a much-repeated phrase that Africa is a mobile market and that start-ups therefore need to focus on this fact. However, few people – and most of the hopeful entrepreneurs – do not necessarily have a grasp of what this means. I have over the last 12 months made presentations at some of these incubators and the one slide that always gets people thinking and talking is the handset pyramid.
It shows a market fragmented between smart phones, feature phones and basic phones and the many different operating systems that make them function. Put brutally, it’s difficult to extremely hard to make an SMS service on a basic phone turn into a business without donor funding. The revenue split with operators is still simply too punishing. Feature phones offer opportunities through platforms like biNu and Every1Mobile but don’t seem to get much focus. And sadly many developers are focused on the smart phone market where numbers using services are still relatively modest.
The incubator hubs do not always seem to tackle the strategic issues like readying their young hopefuls for the tough life that awaits them. And this is what makes the accelerator programmes more interesting as they seem to acknowledge that you need to take the best and help them get better. A successful start-up culture is one in which the majority of young hopefuls fail and maybe even move on.
The incubator hubs do not really have a business model themselves. They are largely donor or charity funded and with anything that’s funded in this way, fashions change and the money moves on. In developed countries, incubators are often funded by local or regional governments but the idea of African national or local government putting things like this on their budget seems fanciful.
Most African cities are cash tills of patronage that pay for bloated (sometimes non-existent) workforces and do not seem to exert much magic on their surroundings. The better informed conjure the name and successes of Governor Fashola in Lagos but he remains one of a handful with vision and drive. In Europe, innovation hubs are often used as part of urban regeneration which is what makes 44 Stanley Avenue and JoziHub interesting: they contribute something to regenerating a run-down area of Johannesburg. Why isn’t this happening elsewhere in Africa?
Having one or two incubator hubs should not be the sum of a start-up culture in a country: it may be a start but it’s not the end. There need to be independent and successful entrepreneurs who can act as role models and sometimes as mentors. And there needs to be funding…Donor funding needs to be used to set up things and then move on. If it’s a public service, African Governments need to fund it out of their own budgets because that way, someone gets to take responsibility…I’m still not completely convinced of the case made for impact investment but I’m willing to wait and see what it produces…Most importantly, Africa needs start-ups that are a commercial success that pull in more money (both local and international) on the back of success.
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