Optimism about African Startup landscape and Why I stopped reading Techcruch

It’s now about three years since I wrote an article about “why I stopped reading Techcrunch” (See copy at bottom) as a guest blog on now defunct Tech Africa blog. At that time I was all-engines fired into the Startup world, very passionate and enthusiastic about building the future unlike today.

I used the Techcrunch figuratively to highlight a glaring disconnect in models used to build Start-ups on the African continent and in Silicon Valley. My analysis drawn from personal experience exposes the cultural differences and mindsets towards entrepreneurship between the Valley and Africa and how that affect how and who builds Startups on the continent.

I guess i was doing some soul-searching and deep introspection of the journey I had set for myself. But now things have changed. Oh yeah, even his Zuckerness visited Nigeria and Kenya last year!

Optimism in Startups

Three years later, there are more startups across the African continent. Disrupt-Africa reports that African tech startups raised funding in excess of US$129 million in 2016 alone which is 16.8 per cent more compared to the previous year. There's more optimism among young Africans about the future of the continent as Quartz Africa writes.

New exciting industries along with high-growth startups are emerging particularly FintTech, e-Commerce and off-grid energy. This is great because the end game of all these industries is a new interconnected continent where more people can come online and consequentially friction-less movement of money and trade.

Today am still very passionate about Startups for several reasons; there’s vast untapped opportunities on the continent which makes it fertile ground for building interesting things. A growing middle class. Most parts of the continent are still offline.

Many still don’t have access to clean energy or even running water. In Uganda, only about 20% of the country is wired to the national grid. And yet with an ever-growing population, reliance on energy is inevitable.

Investing in Infrastructure and Energy

Japan has pledged $30 billion to fund African infrastructure projects over the next three years according to fortune. East Africa Railway is expected to cost $13 billion and the overall value of East African transportation infrastructure project as of 2015 was valued at $29.4 billion according to Asoko Insights. This is good news because movement of goods and people easily across the continent will have great economic boasts.

Governments are beginning to invest heavily on power projects to connect more people to the grid. There’s talk about creating an East Africa power pool. This pool will allow member countries to sell off excess capacity to those that need more power. Currently Kenya has installed capacity of 1,600 MW majorly from Geo Thermo well as Uganda has roughly 862MW mainly from Hydro.

In Uganda, two new hydro power plants — Karuma and Insimba — are expected to come online in less than 12 month. But even with these expectactions, it’ll take years before every single village is wired to the grid. Which makes off-grid energy ever more interesting.

Off-grid energy and Financial inclusion

Fenix International, along with M-Kopa with their innovative prepaid solar energy solutions are also connecting more people to clean energy. Fenix now has at least 100,000 customer base in Uganda alone which is great.

The company also hopes to bundle interesting financial solutions along with its energy products for rural dwellers — micro loans, insurance and saving schemes might be some of the off-short products coming.

When more people can charge their phones with off-grid energy, it means they can use tones of services that are accessible through their mobile devices. It means a trader in Kampala city can easily communicate and pay their supplier hundreds of miles away in Kumi-Ongino digitally circumventing the challenges of liquid cash.

A number of people now communicate and make transactions through messaging Apps like WhatsApp. It also means more people might be able to afford micro loans as low as Ugx 20,000 (~$5) via initiatives like MTN Mokash to buy farm supplies or school fees for their kids.

Car Assembly and manufacturing on the horizon

Kenya is already in full gear to start car assembly as of last year. Car manufacturer Volkswagen started a plant in Thika which will build the Polo Vivo, the first passenger car built in the country. The plant expects to churn out at least 1000 vehicles per year. French car maker Peugeot too according to Business Daily Africa is set to start an assembly plant in the country this year.

In Rwanda, Volkswagen signed an agreement with the Government of Rwanda to explore the possibility of setting up a local assembly plant in Rwanda according to the Newtimes Rwanda.

Uganda meanwhile with its iconic Kiira EV is set to start manufacturing in 2018. Kiira Motors Cooperation, the partly-government owned automobile company last year launched a prototype solar-powered passenger bus.

Now every middle class family in Africa at least either already owns a Japaneses car or at least aspires to buy one. In Uganda, we even had a hit single urging people not to die without buying a car. So there’s a huge demand for cars this side of the globe despite poor road networks.

Internet balloons, Fibre and drones

This is probably my most disappointing piece of the puzzle about the new digital Africa. Despite how critical it is, there’s only been hype and buzz around bridging the digital divide through affordable access to internet. And maybe that’s because we have put our hopes on Silicon Valley big shots to make it happen.

Facebook and Google have all simply raised dust without anything substantial on the ground. Facebook’s “internet.org” project renamed “internet basics” came under heavy criticism by Net neutrality advocates. The rationale was simple; Facebook had ulterior motives that would make it the sole gatekeeper or chief custodians of the digital experience of most users in Africa.

Google on the other hand has equally made noise without results. Google’s project link launched in Uganda and Ghana — a novel idea which advocates for sharing of back-haul internet infrastructure which would be leased to Internet Service Providers at a less fee than if they built it themselves.

There was a lot of excitement in Kampala for instance and we thought Roketelecom’s metropolitan Google-Fibre backed City Wi-Fi network was going to be a game changer.

But no.

Three years down the road, neither Facebook’s much hyped internet drones nor Google’s Fibre network has had an effect on internet costs in Uganda. There’s even talk of Elon Musk’s Space X-backed internet satellites, but I have no reason whatsoever to be particularly enthusiastic about them.

Regional mobile telecoms such as MTN group, Etisalat, Safaricom still reign as kings of mobile internet. Quite frankly, am content with their efforts in bringing more people online. At least there’s 80% 2G/EDGE penetration in most countries in continent, which even though it means slow internet, we can at least be sure there’s some form of connectivity.

e-Commerce and FinTech

Internet growth across the continent is making e-Commerce and Fintech more than a reality. Big bulls in the Kraal; Konga, Jumia under Jumia Group (former Africa Internet Group) and Kilimall are investing heavily to increase their share of the e-commerce pie on the continent.

According to Asoko Insights, Konga, Nigeria’s biggest online retail mall has an estimated revenue of about $164 million while its competitor Jumia Group has $140 million.

Konga Online Shopping Limited: $164 million

Jumia Group Limited: $140 million

Kilimall International Limited: $5 million

Yudala Limited: $2 million

Rupu Kenya: $1 million

~ Source: Asoko Insights

What’s not included in these stats are several small e-commerce transactions happening on Social media platforms like WhatsApp and Facebook. There are even e-commerce chatbots now where you can order goods and and services without having to install extra apps.

Meanwhile, Fintech is the darling of VCs in Africa. There are tens if not hundreds of Fintech startups across the continent. We even have a conference and even an accelerator program based in South Africa specifically for Fintech startups and it’s easy to see why; Africa is leading the world in mobile financial transactions. Banks are super slow and can’t scale. And there’s a huge amount of people that are beginning to use financial and payment services for the very first time.

The Info-graphic below by Irrational Innovations says it all about the Fintech landscape in Nigeria although some of the players are also operational in other major markets across the continent.

And this is the Fintech landscape in Kenya as adopted from Irishtechnews

Hubs and VCs

From Lagos Nigeria, to Nairobi Kenya to Cape Town South Africa or Kampala Uganda, Startups are emerging to take on new opportunities. There are currently more than 100 Innovation or Incubation hubs across the continent. These are spaces to build synergies among startups, create networks and leverage on shared infrastructure like broadband internet and co-working space.

Meanwhile funding has been long taunted as one of the limitations of building startups in the continent. However, a few VC firms are emerging despite being very scanty. In Nigeria for instance, there could be about 12 VC including Lagos Angel Network, Spark, Kernel Fund, Venture Kinetics.

In Uganda, I know of none. So that’s still a challenge. You can read more about the growing interest of VCs in Africa on this Venturebeat article.

Scaling across Africa

Building a startup that scales across the continent is still a big challenge. As they say “Africa isn’t a country”. In most cases Startups that make it usually do so in their home countries. Those that do outside have very deep pockets such as the likes of Jumia Group (former Africa Internet Holdings - AIG) or Uber or M-Kopa.

Those startups that don’t require too much offline transactions or physical assets on the ground have it slightly easier when scaling.

The fact is Africa is unique — very unique. Each market is unique to its own geography. Some markets are fast, some are slow. Some are heavily regulated others are not. Some there’s conflict and in others there’s peace. There are more than 2,000 languages on the continent. It’s huge, it’s different it’s awesome.

Below is a post I wrote in 2014 that I still find relevant today.

Feature Image: Recode


Why I stopped reading Techcruch

TechCrunch founded by Michael Arrington in 2005 has gone on to provide us with updated news mostly about web 2.0 companies, ranging in size from startups to established NASDAQ-100 firms.

Up until recently, I’ve been reading TechCrunch. It was one of the first things I visited when I got a chance to access internet on a campus computer lab computer 8–10 years ago as an undergraduate Engineering student.

I was excited about the web and how small companies were making big leaps in the Tech industry. From the early days of Facebook to when nobody understood what Twitter was all about. TechCrunch was there writing about these cool startups in Silicon valley and it was a source of inspiration to me to the extent that I also starting blogging about Tech in Uganda back in 2010. My single author blog has grown to be a multi-author Tech blogcovering not just Uganda, but the entire African Tech space.

However, my inspiration from TechCrunch has since faded. Not because it doesn’t cover the African Tech space or because now I have a blog where am the Editor-in-Chief. No. It’s primarily because of the content that TechCrunch is publishing these days and how African Tech ecosystem is deceptively following suite.

Before writing this post, I visited the site thinking that perhaps the content therein can change my view. Well, it didn’t.

Misguiding dose of content for entrepreneurs in Africa.

The blog which I’ve already credited for creating buzz around the dot com bubble concentrates on alleviating closing funding from Venture Capitalists as a means to success. This sends a misguided signal to an upcoming entrepreneur who will think that one must raise several thousand dollars to create a successful venture. The perception that’s formed from this kind of reporting blurs the other aspects of entrepreneurship such as having a solution to a real need, persistence, vision, teamwork, passion among other things.

There’s also a disconnect between venture capital and startups in Africa. In fact, there’s almost no VC funding for startups in Africa which makes it incredibly hard and nearly suicidal to follow Silicon valley model of building startups in Africa.

As an internet entrepreneur, I know first hand what it means to raise funds in Africa. It’s probably more daunting than making your startup work.

In fact before we even get to the whole raising funds thing, lets start with entrepreneurship itself. How supportive is the African environment to business and entrepreneurship? Well, not so supportive. In most societies in Africa, the formulae to success is quite simple. Education. The idea is that one should go to school, graduate with good grades and then get a good job in one of big companies around. As Daniel Mwesigwa puts it, in explaining why you should not drop out university “In Africa, Uganda in particular, education is revered with so much ferocity.”

The African parent struggles to raise funds to educate their kids up to university after which their Return On Investment must be immediately visible. They aren’t looking at pouring more money into your newly found venture, but rather for you to get out their home and start your own life. Sometimes you are required to start finance the education of your younger siblings now that you have “made it”.

The stories of self-made college-dropout billionaires such as Bill gates, Zuck, Dell, Jobs are unheard of in Africa. Not only won’t you get financial support, perhaps you won’t even get social support. So if your parents aren’t ready to invest into your startup, who will?

So when I read screaming headline on TechCrunch that such and such startup has raised several million dollars in series A funding, I take a moment in retrospect to reflect how remote and how hard the odds are that such a thing will happen here at home.

Upcoming entrepreneurs must come to terms with the harsh realities that are unique to the African environment — and that could actually be a blessing in disguise!

African entrepreneurs could quite easily escape the ensnare that most innovators fall for — the thinking that you need huge amounts capital to build a successful business. What TechCrunch doesn’t publish is a long tail of startups that despite having raised huge amounts of funding miserably failed.

Now, I must make it very clear that yes, funding is fundamental in building successful businesses. It should be treated squarely as a means, rather than an end in itself. Once an entrepreneur has proven their business model and there’s a prospective market for the product, they obviously need the funding to scale their business. At this stage one could approach a local bank (although it freaks me out to say this), a VC, or maybe their network of family and friends to take their venture to the next level.

Entrepreneurs out there must create their own narratives and share them with others so that they can relate and wisely apply them in their own ventures.

These article first appeared on David Okwi's Medium Account.

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