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, matchmaker 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.
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.
“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.
Schools should be connected to the Internet. Most people, I suspect, would agree with that statement (although a few dissenters may contend that such a statement does not go far enough, and that all schools *must* be connected to the Internet.) Indeed: Lots of countries around the world have been, and are, engaged in efforts to connect all of their schools to the Internet -- and for those schools that are already connected, to connect them faster.
The efforts of the United States in this regard that began under the 'e-rate' program in the 1990s have been much studied and emulated around the world, and countries as diverse as Malaysia, Morocco and Turkey have sought in various ways to utilize Universal Service Funds to help connect the un-connected. Korea has perhaps gone the furthest in rolling out very fast connectivity to all of its schools. Armenia will soon (if has not done so already) have completed connecting all of its schools to the Internet; when I last checked (in late 2012), Uruguay had almost done so as well. Given current technology infrastructure and available funds, not all countries are of course yet able to connect all schools, even if they consider this to be a priority. (Even in a country as developed as Uruguay, 70 schools were reported still to be without electricity in early 2012 -- not being connected to the electrical grid can make efforts roll out connectivity to all a little more difficult ....) In countries where almost all schools can be connected via existing means, a lack of supporting government policies and/or incentives for groups to connect the unconnected schools can mean that, even where connections to the Internet are technically feasible, they may not be commercially or practically feasible. Some recent work by the World Bank found that 95% of all schools in Indonesia could theoretically be connected to the Internet now, if the political will could be found and provided certain policies and incentives were put into place. (Connecting the remaining 5% of schools -- no small number, in a country as large and diverse as Indonesia, with over 13,000 (!) islands and 250,000 schools -- would be much more difficult, as many of the schools in this 5% category are quite remote, and there are as a result often significant, and very costly, infrastructure challenges to overcome.)
OK, if all schools should (or must) be connected to the Internet, what should be the nature of that connection?
Again, most people would probably agree that, in 2013, all schools should have broadband connections to the Internet. This is, in fact, a common theme in many of the national policies related to ICT use in education one encounters around the world, especially in the more 'advanced' (OECD) countries, and increasingly in middle income countries as well. Reasonable people may (and do!) disagree about the extent to which school connectivity should be prioritized compared with other pressing needs in the education sector, but, while there may be a lack of consensus on the relative importance, the general importance of connecting schools, and indeed in doing so at broadband speeds, is a widely held goal in much of the world (even if it is not always practical in the near term). That said:
What exactly does 'broadband' mean when we are talking about connecting schools to the Internet?
It turns out there is no simple answer to this query. Indeed, there are lots of different answers, depending on where you are and the context in which you are posing such a question.
What would you give up to continue using your mobile phone? For most of the six billion mobile subscribers around the world, the sacrifice might be measured in terms of a marginal loss of privacy, or of time.
For a few years, the World Bank's infoDev program has sponsored a monthy online 'EduTech Debate' (ETD) which functions as a sort of rough complement to the Bank's own EduTech blog. The goal of the ETD has been to provide a forum for the sharing of information and perspectives on various emerging topics related "low-cost ICT initiatives for educational systems in developing countries". From the very start, the World Bank's role -- and certainly our voice (to the extent that we have one on these topics) -- has been in the background, and, by design, one only rarely sees a World Bank staff member post on the site, or contribute a comment to the sometimes lively exchanges of opinions that individual posts ignite. We do follow the discussions quite closely, however, and sponsoring the debate has been a useful way for infoDev, the World Bank and UNESCO to be tuned in to some conversations we might not otherwise know are occurring, and to connect with interesting organizations and practitioners doing interesting things around in the world.
The most recent debate has looked at the potential role that ICT can play in promoting the acquisition of basic literacy skills. Especially in places where literacy levels are very low -- where the formal education system has, in many significant ways, failed in one of its fundamental roles -- might ICTs offer some new approaches (and tools) that can help get children reading? Noting (for example) the large number of very basic iPhone apps targeted at children in OECD countries to teach basic letter recognition, phonics, and vocabulary, an increasing number of groups are exploring doing similar things in less privileged environments. But is it really that easy?
I was honored to be asked to deliver one of the keynote addresses at this year's eLearning Africa event at the end of May. (If you'll be in Dar for the event, I look forward to seeing you there!) The organizers asked me to submit an abstract for my presentation by last week. In the belief that sunshine is the best disinfectant, and in the spirit of what I take to be the increasing appetite of the World Bank to be more 'open' about what information it makes available publicly, I thought I would (mix metaphors and) send up a trial balloon of sorts here on this blog, sharing one of the themes I am hoping to explore in my short talk, in the hope that doing so will make my presentation stronger and more relevant to the audience. If past experience is any guide, there will be no shortage of people who comment (below, on their own blogs, via email and Twitter) about where and how I've got things wrong.
Before I get to that, though, some background:
Initially conceived by a diverse set of partner organizations during one of the follow-up meetings to the World Summit on the Information Society (WSIS) as a way to continue in public a number of on-going discussions that were largely occurring in private, since 2009 infoDev's EduTech Debate web site has featured contributions from an eclectic mix of experts and practitioners on a variety of topics related to the uses of ICTs in education, especially as they relate to developing countries. Drawing inspiration from an online debate sponsored by the Economist in late 2007, the ETD site has featured disagreements (and occasional agreements) on around themes like impact assessment, gender, sustainability and a variety of specific technology tools.
Re-visiting some of the issues explored in that Economist debate, in 2011 the EduTech Debate site kicks off by hosting a high level discussion around the question, Are ICT investments in schools an education revolution or fool’s errand?
The World Bank's infoDev program recently released the latest volume in its periodic surveys of the use of information and communication technology in the education sector around the world.
Following on earlier efforts that examined the Caribbean and Africa (and UNESCO-Bangkok's much earlier examination of the Asia-Pacific region), ICT for Education in India and South Asia catalogues what is happening related to the use of educational technologies in this important part of the world.
[Disclaimer: I helped initiate this series when I was at infoDev, and was a reviewer for this latest work, and so am not a neutral disinterested observer here!]
The series of reports include: