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Leveraging start-up ecosystems for development

Mutoni Karasanyi's picture


“What can we do today to prepare students for the labor force in 20 years?” the director general of Israel’s Ministry of Finance, Shai Babad, asked. At an Annual Meetings event last Friday, Babad was asked for his thoughts about successful government policies to enable start-up ecosystems. However, he answered the question with one of the many questions that policymakers continue to wrestle with in the new digital economy.

In recent years, many of the World Bank Group’s country partners have posed similar questions. As Trade & Competitiveness Director Klaus Tilmes commented, “Many clients are now less interested in our money, and more in our knowledge around best practices and effective incubator models. They’re asking ‘How can we create our own start-up ecosystems?’ So we are trying to become more systematic and leverage tools to expand our programs and build them into our lending projects.”

No state is more renowned for its success in building such ecosystems than Israel. The small country contains the highest number of start-ups outside of Silicon Valley and receives the most VC investment per capita. With a population of only 8 million, Israel has over 6,000 start-ups, and 1,000 new start-ups are launched every year. In 2016 alone, Israeli start-ups raised over $4.8 billion.

To foster innovation, let a hundred flowers bloom?

Jean-Louis Racine's picture


Helen Mwangi and her solar-powered water pump in Kenya © infoDev/World Bank

Managers of initiatives that support innovative entrepreneurs have a choice to spread their resources (and luck) among many opportunities or focus them on the most promising few. In developing countries, public and donor programs can learn a lot from how private investors pick and back innovative ventures.

In the early days of infoDev’s Climate Technology Program, our thinking was very much about letting a hundred flowers bloom: supporting a large number of firms with the hope that a few would emerge as blockbusters. Firms were selected on the basis of objective metrics tied to the innovative nature of their ideas and their economic, social and climate-change impacts. For example, while infoDev’s partner the Kenya Climate Innovation Center has more than 130 companies in its portfolio, a $50 million venture-capital fund in California would have at most six. Inspired by private investors, we have since rethought our program objectives for these centers, as well as the way we select and support businesses. The Kenya center is going through a rationalization of the firms it supports.

Like many public programs, infoDev and its network of Climate Innovation Centers had good reasons to support large numbers of companies. The main reason is the need to spread the entrepreneurship risk through a diversified portfolio. A recent infoDev literature review found that up to a third of all new firms do not survive beyond two years, let alone grow. Out of those that survive, data from high-income countries suggest that fewer than 10 percent become high-growth firms. So casting a wide net increases the chances of hitting the jackpot. The opposite approach, picking winners, is seen as destined to fail and distort the market. 

A year in the life of an incubator

Alexandre Laure's picture

Also available in: Français

Youth trained with The Next Economy methodology.
© Cesar Gbedema/Impact Hub Bamako

Last month, Impact Hub Bamako celebrated its first birthday. The first of its kind in Mali, Impact Hub Bamako is part of a global network of more than 15,000 members in more than 80 locations worldwide, from Bogota to Phnom Penh. Combining innovation lab services with incubator and accelerator programs and a center for social entrepreneurship, Impact Hub Bamako provides a unique ecosystem of resources, inspiration and collaboration opportunities for young, creative Malians working towards a common goal.

Co-founded by four young Malians Fayelle Ouane, Kadidia Konaré, Mohamed Keita and Issam Chleuh Impact Hub Bamako seeks to promote entrepreneurship and generate youth-driven solutions to Mali’s problems, as well as support women’s entrepreneurship and encourage social entrepreneurs to build a shared vision and work together for a collective impact.

“Establishing a community of young entrepreneurs was very important to us,” says Ouane, “so that everyone can build on and benefit from each other’s expertise and knowledge.” Indeed, Impact Hub Bamako hosts a diverse community of entrepreneurs, strategic advisors, architects, social workers, students, consultants, renewable energy specialists, and experts in agribusiness, ICT and corporate social responsibility.

By providing a shared space to work, as well as access to meeting rooms, events and that all-important internet connection, Impact Hub Bamako has given participants the opportunity to leverage each other’s expertise, as well as grow their professional networks not just nationally but globally, as Impact Hub boasts a multinational presence.

“This is our comparative advantage,” agrees Keita, now the hub’s director. “Our incubation/acceleration programs seek not only to promote the necessary conditions for job creation in our country, but also to professionalize our workforce and give them the tools to meet the demands of any employer.”

Start-up from scratch? How entrepreneurship can generate sustainable development and inclusion in the Sahel

Alexandre Laure's picture

Also available in: Français

In a first for Africa’s Sahel region, entrepreneurs from Senegal to Chad assembled in Niamey, Niger, for the SahelInnov Expo last month to showcase their businesses and exchange ideas. From livestock to drones, all sectors were on display as a new generation of entrepreneurs and start-ups emerges with bold and innovative ways to address the challenges facing their countries and communities. Increasingly recognized as a strategic path to economic growth, supporting SMEs and entrepreneurs has a key impact on development and is generating more interest from governments in the Sahel. 



Michaëlle Jean, the Secretary General of the International Organisation of La Francophonie, His Excellency Mahamadou Issoufou, the President the Republic of Niger, and Almoktar Allahoury, the CEO of CIPMEN.
Photo Credit: CIPMEN


Hosting the event was Niger SMEs Incubator Center (CIPMEN) whose CEO, Almoktar Allahoury, lauded the initiative. “This is the first time all stakeholders have come together: entrepreneurs, public officials, investors, academia and development partners in one place to discuss the many opportunities and remaining obstacles for the private sector — this is just what we need to take the region to the next level.”

Indeed, entrepreneurship could be especially important for this extremely poor region, with half the population living below the poverty line. Burkina Faso and Niger, for example, are among the fastest-growing economies in the world, yet their GDP per capita are just $395 and $652 respectively, compared to the Sub-Saharan African average of $1,647. A vibrant and active entrepreneurial ecosystem would therefore not only boost economic diversification and improve productivity, it also could prove the vital lever to tackling two of the Sahel’s biggest challenges: youth unemployment and climate change.

The devastating combination of climate change, mass migration, trafficking and the rise of violent extremism has resulted in recurring humanitarian crises and massive food insecurity, affecting more than 20 million people across the Sahel in 2015. Enduringly high birth rates, furthermore, will require millions of jobs to be created to respond to the needs of a rapidly growing and increasingly young population. Institutional reach remains weak and a state of protracted insecurity has taken root over vast swathes of territory.

Sowing the Seeds of Green Entrepreneurship: Startup Bootcamps and Pitching Competitions

Julia Brethenoux's picture

Heading back from a recent mission to Ghana, I felt really proud of what we have accomplished: training 20 of the most promising local clean-tech entrepreneurs through the Green Innovators Bootcamp. The words used to inaugurate the event are still in my head: “This bootcamp is not an end in itself. It’s the beginning of your journey as entrepreneurs.”

Indeed, bootcamps for startups and SMEs – as well as close cousins like Hackathons, Start-up Weekends, and Business Plan Competitions – are an increasingly popular activity used to catalyze innovative ideas and provide entrepreneurs with the tools and resources they need to launch their ventures.

In Ghana for example, infoDev -- a global innovation and entrepreneurship program in the World Bank Group -- organized a two-day training event to help a group of 20 early-stage entrepreneurs assess the feasibility of their business concept, identify their customer base, and refine their business model.
 
Organizing a bootcamp can be very challenging and time-consuming, but, when done properly – read “7 things you need to do to prepare for the perfect bootcamp” – the payoff is big. "Bootcampers" find these initiatives very useful to identify new solutions to the challenges they face to launch their businesses -- mostly access to finance, product development, and marketing. Furthermore, "pitching competitions" and "business contests" offer new entrepreneurs an excellent and safe stage to refine their business pitch -- a key tool of every successful entrepreneur.
 
One of the goals of bootcamps and pitching competitions is to bring together different stakeholders – from entrepreneurs to investors and policymakers – to facilitate the creation of ecosystems in which entrepreneurs can grow and thrive. But is it realistic to expect that bootcamps and similar training initiatives are enough to enable promising entrepreneurs to reach their full potential? The answer is simply: No. Make no mistake: Bootcamps are an exciting tool to create buzz and interest in countries that have little entrepreneurial history and culture. In most contexts, however, there is no follow-through with effective action plans that can keep the momentum going. This not only limits the value of these initiatives, but can also cause harm to a nascent ecosystem.

If you want to go far, go together

Jana Malinska's picture

A new global network of Climate Innovation Centers will support the most innovative private-sector solutions for climate change.
 
Pop quiz: What does an organic leather wallet have in common with a cookstove for making flatbread and a pile of recycled concrete?
 
Believe it or not, each of these represents something revolutionary: a private sector-driven approach to climate change. Each of these products – yes, even concrete – is produced by an innovative clean-tech company. And as of March 26th, those businesses, and hundreds more like them, have something else in common. They’re connected through infoDev's newly established global network of Climate Innovation Centers (CICs), an innovative project that is taking the idea of green innovation beyond borders.
 
Having piloted the CIC model in seven different countries – Kenya, South Africa, the Caribbean, Ethiopia, Morocco, Ghana and Vietnam – it was time for infoDev, a global entrepreneurship program in the World Bank Group’s Trade and Competitiveness Global Practice, to follow a time-honored business practice: to scale up and take this movement global.

And so, as part of last month’s South Africa Climate Innovation Conference, we joined forces with 14 experts from the seven different countries where the CICs operate to establish the foundations of the world’s first global network devoted to supporting green growth and clean-tech innovation.



CIC staff debate and discuss the new CIC Network during the South Africa Climate Innovation Conference.

This global network of Climate Innovation Centers – business incubators for small and medium-sized enterprises (SMEs) – has been designed to help local ventures take full advantage of the fast-growing clean-technology market. The infoDev study “Building Competitive Green Industries” estimates that over the next decade $6.4 trillion will be invested in clean technologies in developing countries. An even more promising fact is that, out of this amount, about $1.6 trillion represents future business opportunities for SMEs, which are important drivers of job creation and competitiveness in the clean-tech space.

The Hype and Hustle of African Tech Startups

Maja Andjelkovic's picture



This article was originally published in
SXSWorld Magazine
 
Hardly a day goes by without an African tech startup being featured in the mainstream media. CNN regularly updates its special report on the topic; The Guardian covers local debates surrounding emerging ecosystems; The Financial Times tracks Africa’s mobile revolution; Forbes has extended its “Top 10” series to include African female tech founders; Vanity Fair pins its hopes of “continental lift” on entrepreneurs. Blogs, opinion pieces and social media cover the sector in even more granular detail. Judging by VC4Africa’s 2015 report on venture finance, perspectives on African incubation and funding models, and the entrepreneurship program announced by Nigeria’s investor and philanthropist Toni Elumelu, it would seem that the African tech sector is among today's most dynamic industries.

Amid the buzz, many investors are asking: “Is the hype warranted?”

According to VC4Africa, an online community of very-early-stage startups and investors, investments through the platform more than doubled in 2014, rising from $12 million to $26.9 million, while the average investment grew from $130,000 to more than $200,000. Their research shows that 49 percent of ventures start generating revenue in their first year and that 44 percent are successful in securing external investment. More than 75 percent of these are in the technology sector, with agriculture, health, finance and energy startups also represented.

Further along the growth path, a smaller number of startups have recently netted over $300 million from a very diverse set of investors, according to CBInsights. 



Recent Investments in African Tech Startups
Adapted from: https://www.cbinsights.com/blog/african-tech-startups
 
At least eight companies have acquired growth capital in Kenya in 2014, along others in Nigeria, Egypt, Ghana, Tanzania and South Africa and elsewhere

New early-stage funds and angel networks in or focused on Africa are also on the rise. Among others, three models stand out: London-based NewGenAngels a collaboration between African and European networks (GAIN, EBAN and AAN); Kenya’s Savannah Fund, a partnership between Erik Hersman (iHub, Ushahidi and BRCK founder), i/o Ventures, 500startups and Draper Associates L.P.; and RENEW, linking American and African investors and startups.
 
Many early stage investors are still learning from their own experiences and adjusting their strategies accordingly. For instance, while most are bullish on Kenya’s tech scene, 88mph, an African seed fund has put further investments in Kenya on hold, while pursuing opportunities in Nigeria’s booming tech sector.
 
African entrepreneurship ecosystems have also benefited from a large number of technology incubators, accelerators and coworking spaces, connected through networks such as AfriLabs and backed by private sources, such as MEST in Ghana, and public-interest projects, such as infoDev’s mLabs and mHubs.
 
According to VC4Africa, the increase of capital is driven by three key trends: growing interest in startups from the African diaspora, the rise of local angel investors, and an increase in cross-border investments.
 
All of these instigate a positive change beyond investment returns; they set in motion a chain of opportunities in emerging and frontier economies. As Stella Kariuki, founder of Zege Technologies, once told me: “I want to be the change I want to see. [. . .] We build solutions that could be global but also solve African challenges practically.” Many of the startups serve consumers at the Base of the Pyramid -- the three billion people globally who live on less than US$2.50 per day, a market that is still largely underserved when it comes to basic services such as energy, education, health and banking.
 
It seems clear that investors and startups in Africa are getting to know each other better and are making more and better matches possible. This is an important step in reducing "the missing middle”: the absence of financing beyond the earliest stages of a company’s growth. As enterprises enter national or regional markets, their capital requirements increase exponentially. Without private and public sources of investment, these requirements stifle all but the independently wealthy entrepreneurs and those with established business networks. A diverse resource base for early-stage firms democratizes the opportunity for growth-oriented entrepreneurs and increases the overall potential of the local creative class.
 
So is now a good time to invest in African technology startups? The answer is yes, as long as investment decisions are made with care, patience, and in partnership with local investment communities.
 
Maja Andjelkovic co-leads the Digital Entrepreneurship Program at infoDev, a global program in the World Bank Group that supports growth-oriented entrepreneurship in emerging and frontier markets in the tech, climate and agribusiness sectors. Maja is interested in the potential of entrepreneurship to contribute to economic, environmental and social development. She has spent over 13 years connecting these fields, including as product manager in a web startup. She is a PhD student at The University of Oxford’s Internet Institute.
 
infoDev / the World Bank Group is organizing two sessions at Startup Village at SXSW Interactive 2015; one on the dilemmas and questions surrounding investing in tech startups in emerging markets, and the other on scaling up and accelerating technology innovation in Africa.
 
Angel investors interested in forming or growing their own local networks can benefit from practical advice and templates in a guide for angel investor groups published by the World Bank’s infoDev program and the Kauffman Foundation.
 
Sean Ding, Angela Bekkers and Jeremy Bauman contributed to the article.

Behind the Scenes of 'Startupland': A Documentary that Tells the True Stories of Entrepreneurs

Toni Kristian Eliasz's picture


Try to search for stories that feature the growing pains and gains of growth-oriented technology startups – content that is not only entertaining, but of high quality and most important, educating. It is a surprisingly hard task in today's economy, where entrepreneurship is booming again.

Entrepreneurs slaying dragons in South Africa

Gerardo Corrochano's picture



“You have a good social project, but it is not an investable company”, I heard fellow judge and technology activist Mariéme Jamme say to a South African entrepreneur who had just given his best business pitch. He was taking part in the Dragons’ Den at the 5th Global Forum on Innovation and Technology Entrepreneurship, a fantastic 3-day learning and networking event organized by the World Bank’s infoDev and the South African Department of Science and Technology. You could see the entrepreneur (let’s call him ‘B.’) gasping for air, and one could hear a pin drop in the completely filled auditorium of the Global Forum. Over 800 people, mostly entrepreneurs, financiers, policy makers and technology ‘evangelists’ from all over the world had gathered here.