VC4A launching Senegal research report: startup ecosystem starting to pick up the pace again

Senegal presents the most vibrant startup ecosystem of the francophone West Africa region with decent Internet connectivity, strong technical education centers, a natural entrepreneurial tradition and stable economy. These factors combined encourage the youth to explore entrepreneurial opportunities and self-employment.

While the ecosystem has seen the rise of successful startups, and new investment actors such as Teranga Capital or Orange Digital Ventures, the overall entrepreneurial community still remains unnecessarily fractured. The different stakeholders have difficulties communicating effectively and could do more to create a common pool of resources, a set of tools, that can help light the way for starting entrepreneurs. Setting up and developing a business remains too difficult because of a relatively small and slow market, a tough regulatory environment and the absence of formal financial support systems for early stage startups and businesses.

The rise of the ecosystem has been closely linked to the activity and prominence of CTIC Dakar, the leading tech hub in Senegal, and perhaps for the entire Francophone region in West Africa. And where CTIC helped to spur much of the early activity, the organization has unfortunately been less active since 2015. This can be explained by the strong staff turnover that has seen the CTIC organization part ways with tremendously talented human resources. Once the organizer of 20 events per year, all of which created great communication and attention around the startups world, the incubator is now down to 2 or 3 events per year. Now we enter a new chapter in which new actors will need to emerge.

VC4A Venture Finance in Africa research

For the fifth consecutive year VC4A has produced annual research and analysis to improve the understanding of Africa’s startup movement. With the support of the Mastercard Foundation, VC4A publishes a pan-African study including 6 country specific deep dives. VC4A conducts this research to share the progress of the VC4A network and to help document the journey of the African startup community at large. Last year the research looked at different factors that determine venture success. The startup ecosystem research series looks at how these startup ecosystems add value to successful venture creation. Based on inputs from local expert Aziz Sy and 15 face-to-face interviews we aim to answer the following research question: ‘How does the Senegal startup ecosystem add value?’

Fresh energy and new dynamism

As of 2018 the startup ecosystem starts to pick up the pace again. The creation of Impact Dakar and the involvement of a couple of telco operators has brought fresh energy and new dynamism to the startup community. Orange has been active with the Linguere Digital Challenge (a contest open specifically for women) complementing the Orange Fab program, its primary incubation activity. But the most interesting program has probably been Expresso’s Innovation Challenge. Expresso has been operating in Senegal as a telco operator for close to a decade and was the latest to get involved in the startup space. They had an effective implementation that made great use of the local talent in combination with their own infrastructure. They opened a dedicated space and have made their resources available to the startups that were selected for the program. Concree, one of the best support organizations for startups in the country, was contracted to help facilitate this work. Expresso and Concree selected a group of mentors, of which I was a part, alongside entrepreneurs like Aboubacar Sidy Sonko (M Louma) and Mafal Lo (Firefly). It practically created its own small ecosystem which immediately provided the startups selected for the program immediate access to a network and much needed knowledge.

“Senegal is still looking for a winning formula to take its ecosystem to the next level. While there is a strong foundation already in place in terms of the talent pool, there is still a long way to go as far as the surrounding support system and infrastructure is concerned.”
– Aziz Sy

Nothing did more to bring the startup community together, however, than the Senegal Startup Act. This stakeholder-led initiative aims to take into consideration all of the needs and requests of the startups ecosystem and to translate this into new regulation and legislation. The document was put together by the community as part of a policy hackathon. On July 19th, the most brilliant entrepreneurs from across the ecosystem met at Impact Dakar and engaged in a world café (a rotative brainstorm that allows small groups to express their opinions on a variety of matters), identifying dozens of problems and formulating dozens of recommendations that were eventually clustered into key points. The organizing team then worked hard to summarize and select the key points, presenting them in front of a government panel including representatives from the tax agency and the Ministry of Finance. Our partner throughout all of this has been the recently created DER (Délégation à l’Entrepreneuriat Rapide), a government agency which has shown great willingness to engage with the ecosystem, and as part of their mission to provide financial and human support to the local startups. Although it still hasn’t made its first loan to a startup, a key moment we have been waiting for, the organization has been dynamic in communicating its goal and purpose. Most importantly, they are listening to the community and what the entrepreneurs have to say.

The winning formula?

Senegal is still looking for a winning formula to take its ecosystem to the next level. While there is a strong foundation already in place in terms of the talent pool, there is still a long way to go as far as the surrounding support system and infrastructure is concerned. To the credit of the startup community, the conversations are back and people are working together to push this agenda forward again. Investors and entrepreneurs have both started to understand the gaps and develop a more common language now. Both are making the effort to communicate around where they can collaborate and what is required. More collaborations start to emerge as a result, and where Impact Dakar and Concree working together to launch Kinaya Lab is just one example.

So what does the winning formula look like moving forward? We need to focus on effective government lobbying to make sure taxes and other regulatory elements are coherent. Strong communication and effort by support organizations is needed to ensure the right people are involved in entrepreneurship development from all sides, and to help drive an effective implementation of these policies. And (perhaps the toughest part) more can be done to help starting companies commercialize their activities while we continue to seek additional early stage investment needed to ensure that the most talented entrepreneurs have an opportunity to get their innovations off
the ground.

About Aziz Sy
Born and raised in Dakar with a 3 year stint in the US where he studied International Affairs and Sustainable Development, Aziz Sy has been involved in the Senegalese entrepreneurial scene since 2014. A project manager at CTIC Dakar for 2 years, he has since founded a couple of businesses, among which Impact Dakar, an incubator trying to bring the Impact Hub network to the country. He has strong experience in entrepreneurial programs and the coaching of young entrepreneurs as well as ecosystem building through events and networking. He sees himself as a connector of people and is passionate about entrepreneurship as a human development tool and a creator of new solutions.

“These mapping studies help us learn how startup ecosystems are developing across the continent and identifies opportunities for their continued development.”
– Ben White, Founder VC4A

VC4A data showing indicators of growth

VC4A research on 128 ventures registered and/or active in the country shows a clear relationship between venture performance and the support these ventures receive from the Senegal startup ecosystem. Overall, the chances of success in securing funding and creating jobs are better compared to the sample of ventures without support from the startup ecosystem. For example, 61% of companies participating in ecosystem support programs secure investment compared to 40%. These companies are also more likely to create new jobs: 87% versus 65%. Still, keeping into account the small sample sizes and the relatively low number of years after official registration the future will tell if these ventures will have a longstanding impact.

Graph 1: Overview of ventures registered on per region in Senegal

More specifically, Senegalese ventures are creating an average amount of 6.04 FTE per venture. When taking a further look at the age groups, 74% of them are between 12 and 35 years which is above the percentage on a pan-African scale (60%). This is a considerable contribution to the country given its growing population and justifies further investment in the growth and development of the startup ecosystem and the entrepreneurs it supports.

Graph 2: Average jobs created per age group in Senegal

About Venture Finance in Africa Research

VC4A research is made possible with support from the Mastercard Foundation and the Work in Progress Alliance. In addition to a pan-African view, the startup ecosystem research series deepens its annual analysis by adding six country deep dives in the following countries: Ghana, Kenya, Morocco, Nigeria, Senegal, and South Africa. These reports have been developed in collaboration with Dalberg Global Development Advisors and local experts in each country. The research explains in more detail what each startup ecosystem looks like and identifies opportunities for their continued development.

These mapping studies help us learn how startup ecosystems are developing across the continent. They include research and analysis on a variety of startup hubs, including Accra, Casablanca, Cape Town, Dakar, Johannesburg, Lagos, and Nairobi. Please contact the VC4A research team – thomas[at]vc4a[dot]com – if you are interested to discuss adding other African cities to this list.

A very special thanks to the people who we interviewed to write this analysis:

  • Ali Diallo MIT Ventures
  • Bassirou Ba Senegal Emergent
  • Gregoire de Padirac Orange Digital Ventures
  • Karim Sy Jokkolabs
  • Karimou Ba Délégation Générale à l’Entreprenariat Rapide
  • Laissa Mouen Kinaya Labs
  • Madji Sock Dalberg + Women Investment Club
  • Marième Diop Orange Digital Ventures
  • Matthias Papet COINAfrique
  • Olivier Furdelle Teranga Capital
  • Regina Mbodj CTIC Dakar
  • Samir Abdelkrim Startupbrics
  • Thierno Sakho Délégation Générale à l’Entreprenariat Rapide
  • Tidjane Deme Partech Ventures
  • Yann le Beux YUX Dakar

Want to learn more?

If you would like to download the report and receive full access to the Venture Finance in Africa research database with more country-specific reports and editions from previous years, register your VC4A Research Account now.