Venture Capitalist take a look at the challenges investing in African tech
VC4Africa was pleased to host the panel, ‘Strengthening the VC pipeline’ at the 9th Annual Conference for the African Venture Capital Association meeting hosted in Accra.
I was joined by Yemi Lalude, Managing Partner of Adlevo, Tayo Oviosu, Founder and CEO of Paga, Karima Ola, CIO of the African Development Corporation, Mathew Boadu Adjei, CEO of Oasis Capital and Arjuna Costa, Director of Investments at Omidyar Network. The time we had was limited for getting into all of the issues we wanted to cover, actually there is more than enough content for a stand alone conference on the subject, but here are some of the points I felt were raised during our different conversations.
– Within the emerging African focused VC space there is a inherent leaning to scalable concepts and a natural orientation toward financial services. As penetration rates increases across African countries, banking services are the first step to unlocking e-commerce activity that will drive the ecosystems development.
– Challenges with market size remain a key constraint. Ghana at 8.4% Internet penetration is looking at somewhere around 1.2 million users compared to the 4.3 million found in Nigeria. The numbers are far less in countries like Tanzania, Ethiopia or Uganda. Innovation can come from anywhere, initially incubated and tested in Accra, Kampala or Dar, but how can a venture then find its way into bigger markets next door?
– Operating in a country like Zambia can be extremely expensive. Sales operations might be in Lusaka, but don’t be afraid to put the back office in CapeTown. Where Nigeria is where a company might want to expand its network of merchants, the programmers and technical staff might be based in Accra. Staff are easier to find, higher quality and therefore cheaper. And it can be as simple as the company needing better power supply and reliable infrastructure.
– There is a need for more qualified entrepreneurs. For the organizations that can, investing into the support ecosystem remains important. Platforms like incubators are critical to developing new networks of entrepreneurs. That said, do the existing platforms successfully produce new ventures and how do we make sure entrepreneurs graduate and get into the market successfully? A stronger link to business development is needed and is a point being addressed by incubators like ActivSpaces in Buea, the Nailab in Nairobi and MEST in Accra.
– There is a growing amount of capital looking to engage ventures at an early stage. It might not be enough, as many entrepreneurs are quick to make clear, but certainly the environment is improving. Two panelists had angels. One happened to be from the US and one happened to be Dutch. Both offering a million USD plus. But we also met local Ghanaian angels investing in early stage ventures here in Accra and we see a growing number of ventures finding early stage support this way. No surprise we see the rise of local angel networks like the Ghana Angel Investor Network (GAIN). A challenge for many entrepreneurs is in developing these contacts and here more could be done to matchmake on a local level. At VC4A we do this via meetups brining the member base together in an informal way that sees lots of business cards exchanging hands.
– Government does have a role to play. Legislation that helps to protect IP is critical. But also efforts like the Ghana Venture Capital Trust Fund. A facility that has helped Ghana based investors top up their funds. More success stories would give governments the opportunity to bolster these programs and expand them. In Kenya the government has gone so far as to promote the development of Konza, an entire tech city.
– Tech is different than sectors like housing, education, agro, etc… Where the first subscribes to a culture more attune to Silicon Valley, the other, more traditional sectors, are more often family run businesses. The approaches to building a portfolio are quite different. The business model and exit plan are also adjusted. Taking from revenue might be more attune for a business when run by a family that isn’t actually looking for an eventual acquisition.
– Average size of ventures on the tech side are still quite small in size. The economics for a pure play early stage tech fund in many cases doesn’t make sense. As a result, some investors have a carve out and allocate a % they can put into early stage technology ventures. Fitting the investments into a larger portfolio can improve a fund’s balance sheet and be more appealing to investors.
– Costs are high. Traveling in Africa is more expensive than traveling across the US. Hotels are not cheap. Qualified staff are not cheap. Secure power and working infrastrcuture can add to the cost base. These costs stretch what can be facilitated with a traditional managetment fee.
– Exits were not a primary concern, although many investors question the point. That said, If you build a business with real scale, there is confidence exit opportunities will emerge. Possibly an exit within the industry as larger funds look to fill their own pipelines with qualified ventures. If you don’t have a long view, and an underlining faith in the market, you probably shouldn’t be involved.
I will look to build on these points moving forward and as always I invite your feedback, thoughts, questions and ideas. Certainly, progress is being made every day and this conference and our time in Accra was testament to that.
Africa’s revolution coming to you on twitter
If you haven’t seen this yet, here is a great insight into the development of Twitter in Africa. The recent events in Egypt, and across the N.African region, have shown us what coming levels of connectivity can bring about. Youth connected can change the world?
Here were some facts from the Portland report:
· South Africa is the continent’s most active country by volume of geo-located Tweets, with over twice as many Tweets (5,030,226 during Q4 2011) as the next most active Kenya (2,476,800). Nigeria (1,646,212), Egypt (1,214,062) and Morocco (745,620) make up the remainder of the top five most active countries.
· 57% of Tweets from Africa are sent from mobile devices.
· 60% of Africa’s most active Tweeters are aged 20-29.
· Twitter in Africa is widely used for social conversation, with 81% of those polled saying that they mainly used it for communicating with friends.
· Twitter is becoming an important source of information in Africa. 68% of those polled said that they use Twitter to monitor news. 22% use it to search for employment opportunities.
· African Twitter users are active across a range of social media, including Facebook, YouTube, Google+ and LinkedIn.
Read the report in full detail.
VC4Africa and the emergence of an African startup culture
Want to know more about VC4Africa and our work to support starting entrepreneurs? Here is a presentation we recently recorded. I outline some of the recent trends and developments we are witnessing in the space and some of our thinking on how we can do more to support the emergence of an African startup culture.
Time to look beyond ICT4D: New media research in Uganda offers a different perspective
Beyond ICT4D: New Media Research in Uganda is a collection of ethnographic reports from diverse perspectives of those living at the other end of the African ICT pyramid. Crucially, these texts refocus on the so-called “ICT4D” debate away from the standard western lens, which depicts users in the developing world as passive receivers of Western technological development, towards Ugandans whose use and production of technologies entail innovations from the ground up. It is this ‘other’ everyday point of view that is too often missing in the ICT4D debate: valuable voices that put technologies, projects and organizations into their proper context.
Conducted in 2009 by a group of five Masters in New Media (humanities) students from the University of Amsterdam under the supervision of Geert Lovink the research examines both the role and implementation of ICTs in Uganda, covering a wide range of subcultures and projects, including internet cafe usage, print media, NGOs and communities, software subcultures and civic new media. The book argues that now is the time to look beyond the technology layer and instead focus on the social implications and local consequences of digital media’s widespread use. By recognizing the impact that ICTs have on society and identifying what functions currently and what needs to be improved, we can more effectively understand and develop these technologies in the future.
Initiated and introduced by Dutch-Australian media theorist and internet critic Geert Lovink this Theory of Demand publication was produced at the Institute of Network Cultures (HvA).
Authors: Ali Balunywa, Guido van Diepen, Wouter Dijkstra, Kai Henriquez and Ben White (yours truly).
Colophon: Authors: Ali Balunywa, Guido van Diepen, Wouter Dijkstra, Kai Henriquez and Ben White. Editor: Geert Lovink Copy editing: Cindy Jeffers, Lily Antflick and Morgan Currie. Design: Katja van Stiphout. DTP: Margreet Riphagen. Printer: ‘Print on Demand’.
Publisher: Institute of Network Cultures, Amsterdam 2011. ISBN:
978-90-816021-9-8.
This publication is also available through various print on demand
services.
Fast Moving Targets: Africa as promising investment frontier
Here is an interview I did last week with Fast Moving Targets, a new series dedicated to showcasing innovation in media, technology and communications. They are very much tapping into Amsterdam as a creative media lab and the beginnings of a promising startup culture here in the city. Importantly, they ask the question, ‘what’s going on, what does that mean for whom and how do you actually get new trends and technologies to succeed?’
It’s great to see initiatives like this come online. It adds to The Next Web (many people do not know they are based in Amsterdam) and Hackers and Founders Meetups as important platforms for engaging the community, identifying key developments and highlighting protagonists in the space. Fast Moving Targets is an initiative of ‘The Crowds‘ and hosted by Erwin Blom and Roeland Stekelenburg. They have a great production team and it was nice of Johan Schaap, the founder of Probaton, to make the connection.
The show is filmed live which gives it an interesting character and streamed via the site. They film the chit chat before and after the actual show (so be aware:) and take questions from people watching via Twitter. The show has an interactive and relaxed feel to it. Mostly because of the Palm beer. It was also great practice for my Dutch!:) Here is the description as posted on the site: ‘Ben White van VC4Africa probeert werelden bij elkaar te brengen. Investeerders en ondernemers. Europa en Afrika. Omdat hij ziet hoe groot het talent in laatstgenoemd werelddeel is, omdat hij overtuigd is van het zakenlijk potentieel, maar ook omdat hij een idealist is die van Afrika houdt. VC4Africa gaat over geld, maar nog veel meer over netwerken. Met al duizenden aan boord. Een aflevering van Top Names van Fast Moving Targets.’
The Rise of a Startup Culture in Africa [Video Presentation]
Technology + Entrepreneurs + A vision = Startups in Africa in need of Venture Capital.
This is a one line summary of the presentation I recently gave at the 1% Event in Amsterdam, the Netherlands. In the presentation I talk about the rise of the techprenuer in Africa and the cheetah Generation that is now empowered with the knowledge and tools they need to change the world. This presentation builds on a lot of the ethnographic research I did in Kampala, Uganda and my experiences working on the ICT Entrepreneurship program at Hivos. I also talk about AfriLabs as a network organization connecting technology incubators in Africa and VC4Africa (Venture Capital for Africa) as a platform for crowdsourcing network, information and capital via the web.
Time to celebrate African success stories!
What better way to support SME development in the African space than by celebrating the entrepreneurs who have already achieved remarkable success. This is exactly what the Africa Awards program is doing and VC4Africa is pleased to partner and support this effort again this year. Recently I had the chance to connect with Hamish Banks, one of the key champions behind the program, and ask him a few questions about this year’s competition.
Why was the AfricaAwards program created?
The Africa Awards for Entrepreneurship program was created to promote the value of entrepreneurship; as we are all aware, SMEs and the entrepreneurs who lead them are the lifeblood of any economy and major contributors to any nation’s prosperity. In sub-Saharan Africa, over 90% of business operations are conducted through SMEs and they contribute around 50% of GDP.
Simply put, the more we can encourage entrepreneurship, the better off we all are. By focusing attention on the amazing stories of these entrepreneurial leaders and creating a platform to tell their stories we want to set them up as role models for aspiring entrepreneurs; these leaders demonstrate the level of business excellence that helps to negate the more negative stereotypes of business in Africa. When we showcase these leaders and the fact that their businesses are the match of any around the world, we create a picture of Africa as a continent of opportunity and an attractive destination for investment capital.
Furthermore, there is a lesson here for policymakers: it is their responsibility to legislate wise policies that make it easy to establish a new business and to ensure a level playing field for all business that encourages growth, free from bureaucracy and corruption.
Lastly, the Awards will support networks of business people that will benefit from improved collaboration, the sharing of best practice and the realization of fresh opportunities – and while every winner has told us that the prize money of $350,000 is attractive, of course, they also tell us that the networking, connections and prestige from being a winner is even more important to their future business growth.
Can you reflect on last year’s event?
Last year was our third year of the competition and by far the most successful to date: we attracted more than 2,700 entries from all of the 15 participating countries, with our first finalist from Ethiopia. We received entries from 18 different industry sectors with a high number from infrastructure development areas – mechanical and electrical engineering, and construction, for example – reflecting the rapid growth in infrastructure projects across the continent. But we also had strong representation for ICT companies (two of which were winners) and an increasing number of entries from business and professional services. We were disappointed not to see more women-owned businesses among the finalists and this year we are making a concerted effort to reach those groups more effectively. The Gala Awards Banquet in Nairobi was a bigger affair than ever before; hosted by Komla Dumor of the BBC’s Africa Business Report and with a keynote speech by legendary Kenyan entrepreneur Manu Chandaria, we brought together entrepreneurs, business people and policymakers in an inspiring showcase of business talent.
What can you tell us about last year’s winner Craft Silicon?
The Africa Awards is about more than just the numbers and last year’s winner, Kamal Budhabhatti of Craft Silicon is a perfect example. In choosing a winner, we look for business excellence – overall profitability, ROI, innovative strategies for growth and flawless execution – but we also place great emphasis on personal leadership, culture and value. Kamal brings all of that together: within Craft Silicon’s core business of customised software solutions for the financial sector, the company’s management is always thinking ahead and has developed innovative solutions in microfinance and Islamic banking, for example, that are fuelling the company’s global expansion.
Craft Silicon is a model of employee engagement both in outreach to university students and in a wide range of benefits to existing employees – such as flexible working hours – and in pushing staff to higher levels of responsibility than they might expect elsewhere. Kamal and his team also demonstrate a deep understanding of the responsibility they share for supporting the communities they serve – from providing free software to microfinance institutions to the computer – equipped Craft Silicon Foundation Bus which travels to Nairobi’s slums and conducts practical training for young people.
It is this complete package that made Kamal and Craft Silicon stand out: a great business run by great people.
This year you take a pan African approach, why was the scope expanded?
It was always our intention to expand across the continent – we just got there a little sooner than we expected, having started with just five countries in 2007 and fifteen last year. The reality is that entrepreneurs are essentially the same everywhere – not just in Africa – and it doesn’t matter the size of your country or the sector in which you compete, entrepreneurs share a DNA that’s hard-wired into their brains. It’s not unusual to hear of a history of start-up, failure, start-up and success and in a sense this defines many of the entrepreneurs we meet: not only are they inspired and inspiring, but they have a resilience about them. And you’ll find that resilience everywhere from Sierra Leone to South Africa to Sudan.
Once we thought about it, not only was there no reason not to expand to the whole of Africa, it is critically important that we did – we want to make the point that Africa is alive with entrepreneurs everywhere, not just in the more developed places you might expect.
How does a program like this help support entrepreneurship development on the continent?
The Africa Awards is built upon teaching by example. One of the reasons we target businesses which fall outside what would be traditionally regarded as being “small” or “medium-sized” is because the leaders of these bigger businesses (with more than $1MM in revenues) have a track record and personal stories that can serve as a practical example and an inspiration. Our first task is to inform and inspire – we will show what homegrown African entrepreneurs have, and can, achieve. On another level we can provide real practical support by brokering connections between the entrepreneur community and the sources of funding which are so critical (and challenging) for them. For example, this year we will organize a one-day conference on entrepreneurship: CONVERGENCE: AFRICA is the platform that brings together the entrepreneurs, investors, policy-makers and businesspeople who will continue to fuel the continent’s burgeoning growth. This one-day conference is designed to be informative, practical, and above all actionable. In addition to headline speakers who are themselves role models of entrepreneurship, the heart of the conference is a series of six Master Classes, conducted by experts in their fields, covering the topics that matter most to entrepreneurs and investors.
The conference will conclude in an exclusive session designed to match enlightened investors and a selection of the brightest entrepreneurs in a series of rapid-fire presentations – what we call Investor Speed Dating – in which we will invite 15 VC and Private Equity firms from across Africa and overseas to hear back-to-back pitches from pre-qualified potential investee companies.
How do you see VC4Africa and its role in the space?
We share the same goals, of course, and see VC4Africa as an energetic and practical resource for entrepreneurs and investors which complements what we’re doing. There’s always a need for a platform for sharing best practice and a space where entrepreneurs can congregate. Like the Africa Awards, such programs are most successful when they become self-sustaining – which happens when members take ownership and see real value in participating. With over 4,000 members, I think VC4Africa is there already- I would just encourage the members to continue to engage in productive discussion and sharing good ideas and experiences as much as possible: this is a great platform for learning.
A final message for all of those entrepreneurs out there?
There’s not much I can say that hasn’t been said much better by the entrepreneurs themselves, so I’ll just encourage them to check the website at www.AfricaAwards.com and submit an entry. Someone asked me the other day why so many Kenyan firms had been finalists and winners in the past, and the answer is pretty simple – they submitted a lot of entries. We want to see applications from every country in Africa – we know there’s a potential winner in every one of them.
Anything else you feel is important to add?
We’ll have a couple of big announcements about the Awards during the course of the next three months, so watch this space. And we’re always open to suggestions and comments as to how to improve the Awards – please let us know.
Great Hamish….. I look forward to seeing this year’s selection come together and to celebrating Africa’s great success stories!
Morning chat with Cameroon’s serial entrepreneur Fritz Ekwoge Ekwoge
This morning in Buea is cool after an early morning rain. Clouds still hang on Mount Cameroon as I sit down to talk to a local legend and one of the first entrepreneurs to graduate from ActivSpaces. They call him ‘Fee.’ He hails from the Southwest Province and ‘doesn’t shut up about his products or the potential for SMS.’ His favorite quote from the 2001 movie Antitrust, ‘this business is binary. You are a one or a zero. Alive or dead.’
When he was five years old his dad would send him to the store to buy groceries, but he had a hard time following orders and would often buy something like sweets instead. His dad told him he could never be a doctor because he would forget the scissors in his patient’s stomach and told him he should be a computer analyst instead. Fritz explains, ‘I had no idea what he meant, but I knew I wasn’t going to be doctor. When I grew up there was no computer around me. But later at boarding school one of my friends had a TI82 programming calculator.’ Fritz would borrow the manual and learned about concepts like loops, conditional statements and assignments. With those basic instructions he was able to clone games like snake, minesweeper and even built a mathematical equation solver. He continues, ‘One night I took a Son Goku image and pixel by pixel I replicated it on the calculator. I used to fool my friends that I had built a scanner that could lift images from a book. Most people in high school knew me for tricks like this.’ Needless to say in school Fritz became an invaluable resource for students struggling to pass their exams 🙂
The famous TI82 🙂
Getting excited Fritz continues, ‘I realized I was spending more time with my calculator than my studies. I knew this was my future. After highschool I went to the Polytechnique and got great results. There I continued programming but still I had no idea about the web or the Internet. Everything was PC programming. One project we did was to build a 3D model of the school in C++. In 2005 I created my first Yahoo account in a local cyber cafe for 5000 CFA (about 10 USD).
Asked how he made the jump to becoming an entrepreneur he describes one of the defining moments of his life, ‘One day I was so broke I didn’t have any money for food and went home to chew on raw onions. I knew I wanted out of this situation and could see that the Internet was a better way for me to deploy my software. At the same time people were willing to pay me to develop websites. Becoming successful it wasn’t long before Price Waterhouse Coopers (PWC) came to the campus and offered me a job. It wasn’t 100% technology but I decided to enter the financial world and it was good to get some business background. I think its the combination of the technical, financial and corporate experience that makes for a good founder.’ With this experience and background Fritz didn’t wait long to start out on his own.
Kerawa, his first independent project, was started in 2007. When Fritz moved to Douala he had a really hard time finding a place to stay and he knew there had to be a better way. Kerawa is an online classifieds service similar to Craigslist and maintains 200.000 listings. By the third year they passed a 1.000.000 page views a month and Fritz is proud to confirm that the project makes a profit. Asked how, he explains that the most significant revenue source is from AdSense and now increasingly from the ‘VIP ads’ service.
Asked about his enthusiasm for SMS he says, ‘My passion for SMS started at school. We were supposed to come out with an Operating System project in 2006. I set up a team and I wanted to go beyond computers and leverage the mobile phone. There is so much power with SMS.’ He created a unique shell that allowed him to command his PC (and all the PCs in the school network) via SMS. He says, ‘Any command on my phone could be executed on the PC. If I wanted to shut it down I could type in ‘Shut Down’ and send it to the machine. The application was originally called VeSMS but is now known as COMPP.’ See one of his academic papers.
Realizing he had the skills to do something interesting Fritz explains, ‘I was telling myself I have to do something with SMS one of these days. I thought there should be a simple way to find contact details for people via their phone. In Africa we grew up with mobile phones but we don’t have a yellow pages or white pages. In Cameroon we have 100.000 fixed line users compared to 9 million mobile phone users. But where is the directory? How are we going to translate the idea of a directory for our needs here in Cameroon?’ On February 2009 he he launched the iYam.mobi beta.
He set up the company with one laptop (which acted like a server) and two phones that served as SMS gateways – one for MTN Cameroon and the other for Orange. He put up a 1 page website to explain how it worked and immediately he saw people testing it from the African countries and the US.
It was a matter of time before the project was discovered by people like Bill Zimmerman who could coach him and help promote him as an entrepreneur. Fritz says, ‘With help and mentorship I was able to secure the funding I needed to grow the iYam.mobi business.’ Now he processes 30.000 SMS a month and recently added an appstore and group SMS functionality.
Asked about the future Fritz pauses, ‘One of the biggest challenges for entrepreneurs here is getting paid for their services. Many people are not comfortable paying online and so we need to develop the sales force that can develop our offline channels. This offline approach is one of our key efforts moving forward.’ Indeed, taking concepts into the market is a real challenge. Not only for Fritz but for starting tech entrepreneurs in countries like Kenya, Uganda, Ghana, Nigeria, etc. His offline efforts are commendable and I think offer a needed focus.
Asked about ActivSpaces he responds, ‘Places like ActivSpaces are so important. I got to meet experienced people and received the support I needed to develop my ideas and build my business. It helped transform me from a local geek to a local star.’ It’s great to meet Fritz and to see first hand some of the progress he is making here in Cameroon. Even more exciting, I can see he is not alone and is surrounded by techies with great projects making similar strides.
And this is only the beginning Fritz explains, ‘We are still in a starting phase here in Cameroon but we are developing models now and I can see things changing. People are abandoning their jobs, not giving into the frustrations and are taking their destiny into their own hands.’ Being at the VC4Africa meetup last night with Buea techies @mambenanje @ekwogefee @nyvacol2005 @didiblaise @camvista & @mohamed_felata I couldn’t agree more.
A video pitch on Njorku.com, making job search in Africa possible
Today Churchill Nanje Mambe, the founder of Njorku.com, uploaded one of the first video pitches from Cameroon. Njorku is a job search engine for Africans world wide, otherwise a platform that aggregates and provides search and browse functionality for jobs from across the continent. In the short term there is a focus on Nigeria, Cameroon and South Africa.
Loy Okezie recently writes on TechLoy, ‘One of the key highlights of the 9ideas Conference held over the weekend in Douala, Cameroon was the demoing of the ‘Elephant project.’ He goes on to explain, ‘Njorku is a jobs search engine that crawls the web (especially job sites) to find jobs based on keyword searches in any African country and makes them available to users.’
This video pitch is great because it gives a personal introduction into Churchill as an entrepreneur and a nice background on his project. While we are in Cameroon we will be working to film more pitches like this and integrate them into the venture profiles on VC4Africa.biz. We hope that entrepreneurs in Buea and Douala will inspire entrepreneurs from across the VC4A network to do the same. When the distance between people is sometimes countries or even oceans video pitches like this can go a long way in breaking the ice.
Let’s connect
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