Dan Evans, Network Science Center at West Point (US), discusses insights from his trips to collect data on entrepreneur ecosystems in various cities in Africa.
The inspiration for our research project evolved out of a fortuitous visit to Nairobi, Kenya in December of 2011. I attended a conference there and used some free time to visit with some tech innovators in the local area. As I was introduced to the booming local entrepreneurial environment I wondered, “What differentiates Nairobi from the other cities I have visited in the emerging world?” The following blog contain excerpts of my original thoughts after my Nairobi visit in 2011.
Nairobi’s tech ecosystem
Nairobi has a tight-knit and vibrant community of technology entrepreneurs, hackers, and other technophiles. Ushahidi, which means “testimony” in Swahili, is one such tech success story. It is a non-profit that specializes in developing free and open source software for information collection, visualization, and interactive mapping. Ushahidi was initially developed to map reports of violence in Kenya after the post-election fallout at the beginning of 2008 using reports submitted via the web and mobile phones. It was later used to map the aftermath of the 2010 earthquake in Haiti, is held as the industry standard for crisis mapping software tools, and is now being adopted by groups such as the United Nations and the United States Department of Defense.
Bishop Magua Centre
The Bishop Magua Centre, along Ngong Road, is a major artery in the western part of the city. The Centre features high-speed Internet access and a robust back-up power supply, both of which are vital to combat frequent power outages in Nairobi. Three prominent “tech organizations” located in the building are NaiLab, iHub and m:lab East Africa.
The first incubator I visited was NaiLab, which has been in operation since August of 2011. It was initially funded by 1%Club, an Dutch organization that has developed a “platform that connects smart development projects with people, money, and knowledge around the world,” as well as some foreign “angel-type” investors. I was fortunate to interview the founder of NaiLab, Sam Gichuru. Sam is quite an entrepreneur in his own right. In addition to leading NaiLab, he is the Chairman of Alpha Centric Limited, an investment company founded in 2011, and is involved in several other start-up companies. He visited the famous Y Combinator established by Paul Graham in Silicon Valley in 2010 and was inspired to develop a similar business incubator/accelerator in Nairobi.
The companies under incubation at Nailab have access to work space and share the cost of overhead such as printers, administrative assistance, etc. Through Sam’s hustle and personal network, he has established a team of volunteer mentors with specialized skills that are an available resource for the businesses. The goal is to get the businesses to point at which they have enough revenue to move to their own office space. NaiLab works to foster strong relationships between the companies that grow out of the incubator. Sam’s goal is to eventually grow his network to about 150 companies.
Sam explained that when NaiLab was founded it was announced in the local technological community that they were accepting applications for seed funding. 30 companies applied and 7 business plans were accepted. The typical loan at NaiLab is approximately $30,000, so this is truly seed money. Most investors are foreign, like the 1% Club, since local investors are conservative and hesitant to invest in local tech start-up companies.
Sam also explained that tech start-ups in Kenya face many legal challenges in addition to the logistical ones described. For instance, the Kenyan legal system has been unable to keep up with issues related to Intellectual Property rights in the new and fast-paced tech sector.
iHub is “an open space for the technologists, investors, tech companies and hackers in the area. This space is a tech community facility with a focus on young entrepreneurs, web and mobile phone programmers, designers and researchers. It is part open community workspace (co-working), part vector for investors and VCs and part incubator.” iHub was the original nexus of the tech scene in Nairobi and Ushahidi was “born” at the iHub during the 2008 civil unrest . “Membership is open to those who are in the tech field – programming, design, or research. Upon acceptance, one is given a special ID card that permits one entrance to the iHub for free.”
m:lab East Africa is a “new incubation facility for entrepreneurs and innovators with a focus on mobile technology,” funded by the World Bank. Several people I met jokingly referred to the Bishop Magua Centre as the “Silicon Building.” All three organizations have a very close relationship and collaborate regularly.
Other incubators and initiatives
During my visit to Nairobi I also learned that the Kenyan government has established several government-sponsored incubators, such as KeKoBi. While several entrepreneurs believe these government-sponsored incubator models are far from ideal, their mere presence indicates the vibrant start-up culture in Nairobi. Anecdotally, I was told that many government efforts focus on creating businesses that focus on exporting goods and services. The government has also established industrial zones with incentives in place for businesses intending to export. I believe that focusing on exports is short-sighted. The middle class is exploding in Kenya and most other countries in Sub-Saharan Africa. The domestic market is poised for massive growth and cannot be ignored; there are numerous domestic opportunities for entrepreneurs and their business.
I was also introduced to another prominent tech initiative. This initiative is an ambitious government-funded $7B project called Konza Technology City. The plan is to develop a 5,000 acre high-tech city situated 30 miles from Nairobi, to include space for a university, firms that outsource business processing, call centers, and other technology and service-based companies. The goal is to establish this city by 2030; some have dubbed this project the “Silicon Savannah.”
Keep an eye on the VC4Africa blog for more insights from other entrepreneur ecosystems across Africa. Next will be Kampala.
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